Notes payable are written notes of companys

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had a small increase comparing to notes payable. Notes payable are written notes of company’s obligations that are “due for payment within one year” (Kimmel, Weygandt, Keiso, 2009, p. 489). Most companies supply notes payable if they have short-term financial needs. Kellogg’s company has to pay interest on the notes payable, which are also recorded under interest expense on an income statement. Kellogg’s reports issuing $216 million in U.S. commercial paper for an effective interest rate of 0.24%, and they borrowed $18 million from the bank for business operations. This clearly explains an increase from $44 to $234 million within a year (Kellogg’s, 2012, Note 6). Importance of Balance Sheet and Income Statement The balance sheet is a very important report for management and investors. The balance sheet shows the assets of the business and the liabilities as well. When the difference between the assets and liabilities is found we get the net worth of the business. Net worth is very important because it is a key indicator of how long the business is expected to stay financially strong. The balance sheet gives the management the information of how to manage and pay its debts. Underwriters for the business also use the balance sheet to assess how well the business will be able to manage its finance of operations. Management will look at the balance sheet to determine how to purchase additional equipment. By looking at the balance sheet they can determine if purchasing the equipment on debt is the correct course of action for the business at that time. The balance sheet is a visual representation of the accounting equation. What can also be seen from the balance sheet is owner’s equity, the value of the business’s sock and number of shares
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Financial Reporting Problem: Part Two 5 outstanding. The government will look at the balance sheet to ensure the business is complying with all requirements and set laws. Potential investors and lenders of the business need the information to find out the credit worthiness of the business. The income statement is a wealth of information for any investor interested in pursuing a company. Revenues and expenses of the company are presented for a specific period of time.
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