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About this document
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- 4 pages
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- Format
- Subject
- Accounting
- Module
- ACC 280 · Week 1
This document explains the purpose of financial statements and the four main types: income statement, retained earnings statement, balance sheet, and statement of cash flows. It also covers who uses financial statements and why, for Week 1 of ACC 280.
What's inside
- Purpose of financial statements
- The four main financial statements
- Who uses financial statements
- Why financial statements are important
- The accounting cycle
Who it is for: Students taking ACC 280 Financial Statements. (Undergraduate)
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Summary
Financial statements are key tools for decision-making. Students learn what financial statements are, who uses them and why.
The Purpose of Accounting
Accounting records all financial activities of an organisation. These activities are recorded in monetary terms in ledgers and journals. This is part of the accounting cycle.
The Four Financial Statements
The four financial statements are the income statement, retained earnings statement, balance sheet and statement of cash flows. Each statement provides relevant financial data for internal and external users.
Users of Financial Statements
Users of financial statements include managers, investors, creditors and employees. They use financial statements to satisfy their different needs for information.
Financial Statements as Tools
Financial statements are tools used by managers, investors, creditors and employees to make effective decisions. These statements are based on the information used by management about the financial position, performance and changes in financial position of the enterprise.
Key terms
- Accounting cycle
- The process of recording, classifying and summarising financial transactions.
- Balance sheet
- A financial statement that reports assets, liabilities and stockholders' equity.
- Income statement
- A financial statement that presents revenues and expenses and resulting net income or net loss.
- Retained earnings statement
- A financial statement that summarises the changes in retained earnings for a specific period.
- Statement of cash flows
- A financial statement that summarises information concerning the cash inflows and outflows.
- Users of financial statements
- People who use financial statements to make decisions, such as managers, investors, creditors and employees.
Questions this document helps with
- What are the four financial statements?
- Who uses financial statements and why?
- How do financial statements help in decision-making?
Summary written with AI from the document's text.
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