Income statement and balance sheet Essay Example | Topics and Well Written Essays - 750 words

Income statement and proportion sheet - Essay ExampleThe business company has more accumulated wealth that the governments of the over 200 countries in the world combined.There argon thousands of publicly traded companies been traded on Wall Street and international markets such as the London Stock Exchange e very(prenominal) day. payable to the importance of these capital markets there is a need for professionals dedicated to monetary reporting. Publicly traded companies have to hit financial statements every explanation period. The normal accounting period is one year, but most companies to a fault release quarterly financial statements. The four major(ip) financial statements atomic number 18 the income statement, balance sheet, statement of gold flow, and statement of stockholders equity. These four financial statements are included in the Annual Report of corporations. The purpose of this report is to analyze and describe the income statement and the balance sheet. The income statement and the balance sheet are two interrelate statements. The outcome of the income statement affects the equity account of the balance sheet. The income statement is a financial report that provides info regarding the profitability of the company during an accounting period. The top figure in the income statement is sales. Sales are very important because they provide the economic asset needed to operate a business. The sales of the company are subtracted by the cost of goods sold. The subtraction of those variables is the thoroughgoing(a) profit. At the bottom of the income statement the operating expenses and taxes are subtracted from gross profit to arrive at net income. The income statement is a very valuable report because it indicates how head a business operation is doing in terms of financial success. The income statement reports the revenues and expenses of an enterprise during a intrinsic or fiscal year. The top and bottom figures of the income statement are the two numbers investors look for which are sales and net income. The higher the figure of net income the better off a company is financially. force out incomes help companies accumulate capital. The net income figure is transferred from the balance sheet to the stockholders equity section. The sustain major financial statement is the balance sheet. The balance sheet is considered a statement of position. This means that the figures illustrated in the balance are the account balances at a specific point in time. The three major components or categories within the balance sheet are assets, liabilities and stockholders equity. The internal structure of the balance sheet follows the logic of the basic accounting equation. The basic accounting equation states that assets are equal to liabilities positive stockholders equity. An asset so-and-so be defined as an item of economic repute owned by an individual or corporation (Answers, 2011). The assets in the balance sheet are li sted in order to liquidity. The most liquid asset is cash. Equipment and machinery are two examples of assets. Machinery is a fixed asset that ordure be used to generate revenues. Assets can also be converted to cash by marketing them. The liabilities of a company are short and long term obligations to financial institutions such as banks. It is favored for a company to have a low level of debt. Debt instruments can be used to pay expansion projects. The debt section of the balance sheet is divided into short and long term liabilities. The last atom of the balance sheet is the equity section. The balance sheet and the income statement are prepared once the accounting department completes the accounting cycle. These two financial statements are extremely valuable pieces of information for the user of financial information. It is mandatory for public companies to release the financial statements at least once a year. The regulatory situation that foresees the financial actions o f public corporations is the Securities and Exchange Commission (SEC). The data in the balance sheet and income statement can be used by financial analyst or anyone with financial knowledge to perform ratio, trend,