The Four Characteristics Of The Four Financial Statements

The Four Financial Statements Financial statements are accounts or records that summarizes fiscal or monetary activities of an organization, an individual, or any article or unit. Fraser and Ormiston informed us that financial statements can seem like a map or maze. As a map it clarifies things but as a maze it can be quite complex. Even though financial statements can be either a maze or a map, it should only be a map. Being a maze causes people to be confused and could also be deceiving or cause them to make the wrong investment decision. This reminds me of Leviticus 19:35-36 which states tells us not to be deceiving or dishonest but to use honesty. The financial statements are created around the principles of the GAAP. The GAAP

A balance sheet can be given at any point in time but only shows a particular date. There are two other names for a balance sheet, statement of condition or statement of financial position. The main characteristic of for the balance sheet is that it assesses liquidity. Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset 's price (Investopedia.com). In order to fully understand a balance sheet you must first understand the relationship of every account and the financial statements simultaneously. The balance sheet informs us that asset equals liabilities plus stockholders’ equity. Assets are items possessing service or use potential to owner (Fraser & Ormiston, 2012). Liabilities are lawful dues or obligations that organizations have while doing business. Stockholder’s equity is represents the capital obtained from investors in order to receive stock. There are two main sources that stockholders’ equity comes from and that is money and retained earnings that was accumulated over time

In other words the cash flow statements informs investors where money is coming as well as going; making sure everything is accounted for. The terminology used in book referred to it as the inflows and outflows. The cash flow statements can be provided yearly or quarterly. After observing an example of a statement, I noticed that cash flow statements are separated by financing, operating, and investing activities. Cash flow statements are very similar to a balance sheet. The only difference is that the cash flow statements displays the variations or fluctuations in the balance sheets between periods. That’s the basic principle of cash flow statements. The change in cash between periods is explained by the changes in all of the other balance sheet accounts, and each balance sheet account is related either to an operating activity, an investing activity, or a financing activity (Fraser & Ormiston, 2012). The four parts of a statement of cash flows are cash, operating activities, investing activities, and financing activities. From my research and studies, cash flow statements characteristics are sales and expenses or inflows and outflows. Some examples of inflows or sales are cash sales and credit sales. Some examples of outflows or expenses are operating costs and