Acc 410
Acc 407 - “Financial statements are prepared so that the financial information can be used by stakeholders to better understand and manage the firm” (van Auken, 2011). Financial statements give investors, creditors, labor unions and management the information required to make informed decision in regards to a company. Within a company many department use financial statements to make decisions in regards to pay raises, marketing strategies, collective bargaining agreements and asset management. External stakeholders such as creditors use financial reports to determine if companies are able to pay their debts. Financial statements allow certifiers to give an accurate report to meet the requirements of the Sarbanes-Oxley Act (SOX) of 2002. The four main financial statements are balance sheets, income statement, retained earnings statement and statement of cash flows.
Acc 410
Balance Sheet
“The balance sheet reports assets and claims to assets at a specific point in time” (Kimmel, Weygandt, & Kieso, 2009 p.14). The following items included are included on the balance sheets are the company assets, liabilities and the shareholders equity. The claims of creditors and claims of investors are the two sections on the balance sheet. The balance sheet utilizes the standard accounting equation Assets = Liabilities + Stockholders equity. The balance sheet allows financial managers to determine the debt to income ratio. This allows the mangers to determine an effective method to decrease the debt of the company. “Creditors analyze a company’s balance sheet to determine the likelihood that they will be repaid” (Kimmel, Weygandt, & Kieso, 2009 p.15). Creditors can use the company’s assets as collateral for debts.
Acc 410
Acc 410
Balance Sheet
“The balance sheet reports assets and claims to assets at a specific point in time” (Kimmel, Weygandt, & Kieso, 2009 p.14). The following items included are included on the balance sheets are the company assets, liabilities and the shareholders equity. The claims of creditors and claims of investors are the two sections on the balance sheet. The balance sheet utilizes the standard accounting equation Assets = Liabilities + Stockholders equity. The balance sheet allows financial managers to determine the debt to income ratio. This allows the mangers to determine an effective method to decrease the debt of the company. “Creditors analyze a company’s balance sheet to determine the likelihood that they will be repaid” (Kimmel, Weygandt, & Kieso, 2009 p.15). Creditors can use the company’s assets as collateral for debts.
Acc 410