Accounting Principals :: essays research papers

MemoIn some(prenominal) business no matter how big or small mo illuminateary statements are crucial if achieving success is the ultimate goal. There are trine main types of financial statements, they are Income statement, sense of equilibrium canvas tent and statement of proprietors lawfulness. All three of these financial statements can be looked upon to get wind where changes can be made in a friendship to envision better success.The income statement is important because it presents the revenues and expenses allowing a company to see the net income or net firing. It is prepared by simply subtracting the expenses from the revenues. The balance sheet however is critical in reporting the assets, liabilities and owners equity up until a condition 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 long horse amount for all assets. A company also takes all liabilities and owners equity and adds them together as well. This enables the company to get a total sawbuck amount for all liabilities and owners equity just as it can with assets.The statement of owners equity is a fair statement that summarizes the changes in owners equity for a specified period of time. It is calculated by the simple formula of Beginning owners equity + additional investments + net income - drawings = ending owners equityThis financial statement allows the company to see if they are increasing, maintaining, or losing owners equity.All three of these financial statements have an interrelatedness with one another because each statement uses the numbers from the preceding statement. For illustrate the statement of owners equity could not be resolute without the having the income statement. The reason for this is because one must know the net income/net loss for determining owners equity. Also the balance sheet could not be formulated without having t he statement of owners equity because it to is necessitate when determining total liabilities and owners equity within the balance sheet.