Introduction to Financial Accounting Assignment Example | Topics and Well Written Essays - 750 words - 1

Introduction to Financial Accounting - Assignment Example The researcher states that it is important to recognize that there are various types of financial statements; the balance sheet, the income statement, the statement of retained earnings and the fourth one is the statement of cash flows. The balance sheet also abbreviated as BS is the one that includes records that show the financial position of the organization as at a certain time. It is particularly charged with offering information on the organization’s assets, liabilities and lastly the capital outlay. Through the balance sheet, the various stakeholders are able to analyze the strength and potential of the enterprise. The income statement, on the other hand, gives information on how the enterprise performed within a certain period in time. It usually includes operating and non-operating activities that resulted into bringing in revenue or incurring of expenses by the firm. Therefore, when the two are drawn together the end result is a loss, a profit and rarely an equal bal ance and for this reason it is in other words termed as the profit and loss account or statement abbreviated as P & L. The third is the statement of retained earnings which gives information on the various changes that have occurred to retained earnings of an organization within a certain period. It shows how the retained earnings as at the beginning of a certain period was affected during the period to arrive at the closing balance of that period. The last record is the statement of cash flows which shows where a company’s financing is derived from and the various spending channels of the said finances. It shows an account of cash and cash equivalents and how these are flowing in and out of the company.