Fundamentals Of Financial Statement

Fundamentals Of Financial Statement

Length: 840 words (2.4 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
Fundamentals of Financial Statements
Starting a business requires much time, commitment and patience. The ultimate goal of most businesses is to be professionally and financially successful. In order to show the progress of the business operations, meticulous financial statements must be kept. This statement communicates economic information about the business to individuals involved in making decisions and judgment. According to the University of Phoenix 2006, "An entity's financial statements are the end product of a process that starts with transactions between the entity and other organizations and individuals."
Connie Rochce started a cookie business in November 1986. Developed was a business plan and place people to assist. Connie was concerned, needed was someone to maintain the financial accounts. Aunt Connie's Cookies, financial statement for November and December are reviewed along with a suggestion to expand her operation.
The transactions in Connie's financial statement addressed the balance sheet, income statement and statement of cash flows. Reviewed will be a few transactions in the balance sheet and income statement. Connie's initial transaction of depositing $80,000 into her account to start her business increased her property. This transaction increased the company's equity and was added to balance the account. According to the University of Phoenix (2006), "the balance sheet is sometimes called the statement of financial position because it summarizes the entity's resources (assets), obligations (liabilities), and owners' claims (owners' equity)". Kitchen and office equipment were purchased along with supplies. With theses three transactions she also increased her property. Purchasing the supplies increased her debt but still added value to the operation of the business. Meeting her obligation of the first sale increased revenue, this was shown in the income statement. This statement will show Connie whether the business is operating at a profit or loss. Greta (1998) stated the following:
The balance sheet can show how financially sound a company is. The income statement can answer every investor's central question: "How much money are they making?" Even more important, the income statement can provide a solid basis for forecasting future profits.
If Aunt Connie was seeking a loan to expand her business the financial statement can show income in advance. Aunt Connie can, in good faith, accept a future order from a client. Connie can show this transaction as income received in advance and a liability under unearned revenue. During the process of balancing the books the income received in advance would be entered as an adjustment.

How to Cite this Page

MLA Citation:
"Fundamentals Of Financial Statement." 14 Aug 2018

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay about Fundamentals of Financial Statements

- Fundamentals of Financial Statements The accounting equation: The accounting equation defines the relationship between the five account types. The basic equation is assets equal liabilities plus equity. This is the format seen on a balance sheet. The profit and loss accounts—revenues and expenses—also affects equity. Revenues from the sale of goods and services increase equity, while expenses incurred in the course of business decrease equity. Therefore, the accounting equation can be expanded to assets equal liabilities plus equity plus revenues minus expenses....   [tags: Business Finance Accounting]

Free Essays
1194 words (3.4 pages)

Examining Financial Statements - Landry's Restaurants Essay

- Examining Financial Statements - Landry's Restaurants Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p....   [tags: Business Accounting]

Research Papers
1117 words (3.2 pages)

Essay on Accounting and Financial Statements

- In this essay I am going to explain and identify external users of accounting information and give detail on the main characteristics and how these characteristics and the conceptual framework develop the benefits of financial statements for external users. Financial accounting includes information distributed to external users that are not part of the enterprise, e.g. stockholders, creditors, customers and suppliers, although the information is also of interest to the company's officers and managers....   [tags: Accounting / Finance]

Research Papers
1596 words (4.6 pages)

Statement of Purpose Essays

- Electronics has always been an orphic subject for me. Electronics applications and technology was always an unanswered question for me. As I grew older the questions were answered but at the same time many new questions with more complexity started haunting me. This search for the answers aroused a passion towards Electronics and started exploring the developments and applications in electronics but that did not quench my thirst for knowledge. Then I understood only a graduate education can offer me a great deal of intellectual and personal satisfaction and challenge....   [tags: electronics, education, programming]

Research Papers
757 words (2.2 pages)

Statement of Purpose Essay

- When I was a freshmen in AU, my friend asked me to help him out with his small business, since I’m specialize in public speaking, communicating with people, and able to speak in various languages: Cantonese, English, Thai, and Spanish. He had screen printed many different styles of T-shirt, which he designed himself with Adobe Illustrator and Photoshop. He wanted me to help him to promote and sell those T-shirts on the street nearby the Ramkhamhaeng road, and also in my university. It was my first time ever laid my hands on real business....   [tags: education, business, culture]

Research Papers
1241 words (3.5 pages)

My Enthusiasm for Management Sudies Essays

- My enthusiasm for Management studies is fairly self-explanatory: people, throughout life, will either manage or be managed. In both situations management skills are essential. The study, at high school level, of modules such as business economics, organizational behaviour and marketing has helped me to develop a stronger grasp of management fundamentals. In the US, during a six-month International Exchange Programme at the Sun Prairie High School in Wisconsin, I took a Business course, which sparked an interest in the field....   [tags: statement of purpose, career choices]

Research Papers
1328 words (3.8 pages)

Personal Statement Essay

- The Florida Comprehensive Achievement Test (FCAT) is the statewide test that measures the academic achievement of public school students towards meeting the Sunshine State Standards benchmarks. The quarterly Reading and Mathematics Benchmark Assessment exams gauge student achievement on individual strands based on these Sunshine State Standards, which school districts require schools to administer to students within the appropriate content area. Teachers and administrators pour over the information at the conclusion of the exam and the data mining gets underway....   [tags: Professional Goals]

Research Papers
873 words (2.5 pages)

Essay about Analysis of United Technologies Corporation

- Analysis of United Technologies Corporation United Technologies Corporation, UTC, was founded in 1934 as United Aircraft Corporation and has since become a global leader in the aerospace industry. UTC is a multi-faceted and diverse company comprised of both an aerospace division and a building and industrial systems side. The aerospace side is comprised of; of Pratt Whitney, UTC Aerospace Systems and Sikorsky helicopters. The industrial side is comprised of; Otis, Carrier and Kidde. Having such a diverse and global mix of business brings both stability and cross functional talent to every business unit across the globe....   [tags: business pllanning, financial analysis]

Research Papers
1684 words (4.8 pages)

Financial Statements Essay

- Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values. In above case there might be companies that are healthy and many go through period of financial distress....   [tags: Economy, Financial Distress]

Research Papers
2290 words (6.5 pages)

Financial Statements Essay

- In recent history, there have been quite a few memorable cases of corporations manipulating financial reports in order to deceive stakeholders. Deceptive accounting practices are like a disease, and should be rooted out immediately. These practices undermine the stability of U.S. financial markets, and can make people less willing to invest in stocks. Financial reporting is the key to maintaining trust in the financial system and any manipulation should not be tolerated. The purpose of financial statements Financial statements are the primary instruments used in assessing the performance of a business and its managers (Gibson , 2013)....   [tags: financial reporting, accounting, manipulation]

Research Papers
943 words (2.7 pages)

However, one bank is probably less likely to lend Connie the money. Connie may need to seek several sources. The business has been in existence since November and does not give a good overview of the profits and/or losses. A small profit was shown during that time.
Hendricks (2005) provides the following for entrepreneurs after one year of business start-up:
Personal savings, friends-and-family and bootstrapping suffice to start many a new enterprise, but as your company grows, its needs for capital are likely to outstrip those initial funding sources. The good news is that now you have a track record, you'll be much more attractive to banks, angel investors and other financing sources.
Connie needs a stronger and longer track record of her business performance to strongly negotiate borrowing money.
After reviewing the University of Phoenix simulation of Aunt Connie's Cookies from November and December the following was discovered:
1. Initial start up of $80,000, increase equity and property
2. Purchase of kitchen and office equipment, increased property
3. Office equipment increased property, purchased on credit and shown as a debt in accounts payable
4. She partially settled her debt with cash and decreased her accounts payable
5. Rent paid in advance increased property and decreased cash
6. From her first sale revenue increased
7. The credit sale increased accounts receivable and revenue
8. The credit sale paid in cash which decreased her accounts payable
9. Salaries paid decreased expense and capital
10. Utilities is an expense decreasing cash
11. Personal use of cash decreased cash and capital
12. Insurance decreased by 6 thousand, expenses decreased by $500 to cover the premium for the remaining of that year in which the remaining was placed in the unexpired Insurance for the next year
13. An order not year received increased cash and unearned income
14. Money borrowed has interest, it is a liability as accrued interest and analyzed interest expense
Financial statements are extremely important in a business. The statement gives a snapshot of the profit or loss either quarterly or yearly. Included are the gross and net sales, operating expense and profit, pre-taxed profits, taxes payable and net income after taxes. Income statements are valuable tools in situations where credit review may be necessary. "Making a side-by-side comparison of a company's income statement and balance sheet over two or more accounting periods makes determining trends and spotting emerging problems far easier than looking at a customer's financial performance during a single accounting period" (Dennis, 2006).

Dennis, M. (2006). Encyclopedia of credit. Retrieved March 18, 2006.
Greta, A. (1998). Part 3: Dissecting the income statement.
Hendricks, M. (2005). Charting your business time-line – years 2-5: Time to grow.
University of Phoenix. (2006) Week one overview. Retrieved March 16, 2006, from University of Phoenix, Week One, rEsource. MBA503-Web site:
Return to