Acc 561 Financial Statement Differentiation

Financial Statements Differentiation Katie L. WilliamsACC/561 AccountingDecember 17, 2012Monique SmallingFinancial Statements Differentiation Financial statements provide critical information about a company’s past, and present financial abilities. The four important financial statements are as follows: balance sheet, income statement, retained earnings statement, and cash flow statement. Each of the four financial statements contains specific information about a company, which is useful to investors, creditors, and managers alike when making critical decisions about the company.Balance SheetThe balance sheet is a statement that shows the “financial position of an entity on the last day of the accounting period” (Business Dictionary, 2012, p.1). The balance sheet shows the following information: current assets, how the company pays for these assets, and current liabilities along with amounts. In addition, the financial calculations made within the balance sheet come from the common accounting equation of assets = liabilities + stockholders equity. Within this financial statement, the following subheadings are shown, current, and fixed assets, current, and long-term liabilities. Along with the balance sheet is the income statement.Income StatementThe income statement is a summary of a “management’s performance reflected in the profitability or