Saturday, October 12, 2019
Accounting Principals :: essays research papers
Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Memo Ã Ã Ã Ã Ã In any business no matter how big or small financial statements are crucial if achieving success is the ultimate goal. There are three main types of financial statements, they are: Income statement, balance sheet and statement of ownerÃ¢â¬â¢s equity. All three of these financial statements can be looked upon to see where changes can be made in a company to ensure better success. Ã Ã Ã Ã Ã The income statement is important because it presents the revenues and expenses allowing a company to see the net income or net loss. It is prepared by simply subtracting the expenses from the revenues. Ã Ã Ã Ã Ã The balance sheet however is critical in reporting the assets, liabilities and ownerÃ¢â¬â¢s equity up until a specified date. When preparing this financial statement a company simply takes all of their assets (cash, accounts payable, supplies, equipment etc.) and adds them together to get a total dollar amount for all assets. A company also takes all liabilities and owner's equity and adds them together as well. This enables the company to get a total dollar amount for all liabilities and ownerÃ¢â¬â¢s equity just as it can with assets. Ã Ã Ã Ã Ã The statement of ownerÃ¢â¬â¢s equity is a simple statement that summarizes the changes in ownerÃ¢â¬â¢s equity for a specified period of time. It is calculated by the simple formula of: Beginning ownerÃ¢â¬â¢s equity + additional investments + net income - drawings = ending ownerÃ¢â¬â¢s equity This financial statement allows the company to see if they are increasing, maintaining, or losing ownerÃ¢â¬â¢s equity. Ã Ã Ã Ã Ã All three of these financial statements have an interrelationship with one another because each statement uses the numbers from the preceding statement. For instance the statement of ownerÃ¢â¬â¢s equity could not be determined without the having the income statement. The reason for this is because one must know the net income/net loss for determining ownerÃ¢â¬â¢s equity. Also the balance sheet could not be formulated without having the statement of ownerÃ¢â¬â¢s equity because it to is needed when determining total liabilities and ownerÃ¢â¬â¢s equity within the balance sheet.
Posted by g at 3:26 PM