Overview of Accounting Paper

Running head: OVERVIEW OF ACCOUNTING PAPER

Overview of Accounting Paper

*Thunderous Applause*

Thank you so much for having me on such short notice. I would not miss the chance to talk to you all about the importance of Accounting and Financial Statements. My time up here is very limited, so I will make this brief. If you have any questions, please feel free to raise your hand at anytime.

Financial statements are all the records of any business’ financial activities. These statements determine how profitable a business is. They also give a synopsis of both long term and short term financial conditions. The four basic financial statements are as follows: balance sheet, income statement, statement of retained earnings and a statement of cash flows. The balance sheet is responsible for presenting companies current assets and liabilities. Examples of Assets are “cash, cash equivalent; assets held for collection, sale, or consumption” (Deloitte) Liabilities “are those to be settled within the enterprise's normal operating cycle or due within 12 months, or those held for trading, or those for which the entity does not have an unconditional right to defer payment beyond 12 months” (Deloitte) A corporations profit or loss is included in the income statement. Revenue, finance cost, tax expense are what one may typically find in this statement. The statement of retained earnings explains all changes in earnings during a certain period of time. The statement of cash flows enlightens notions as to how a company is balancing its accounts receivables and payables, managing its flow of funds. The cash flow statement provides some valuable insights are gained. For example executives want to know if the cash generated by the company will be sufficient to fund their expansion strategy. Suppliers want to know if their customers will be able to pay if offered credit. The cash flow statement shows all of this.

“The objective of financial statements is to provide information about the financial strength, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions” (Deloitte) Credit and Eqiuity investors as well as regulatory bodies of the government (IRS, Utility Commissions) are the primary users of financial statements. But you as small business owners will want to become familiar with all these types of statements as you may need to apply for a small business loan. These statements will show a realistic picture of business activity.

The managerial report is a little bit more distinct than the other forms. This report is almost like a proposal, it goes just a bit further than just showing some financial information. The author is acting as an advocate for a recommendation that is being made. There are three characteristics to this type of report. “First, this type focuses heavily on the conclusions the writer has reached rather than dwelling on facts and simple analysis. Second, this type seeks to persuade others to support the writer’s conclusions.