What Are The Four Most Important Financial Statements A
What are the four most important financial statements? Briefly describe each Much success in today’s business world is tied in with numbers in the form of accounting and financial statements. Being able to understand and properly read these statements is a critical component in truly knowing a business and properly assessing its overall financial performance. Financial reporting is the issuance of written documents in the form of the financial statements by the companies to the shareholders, stakeholders and other interested parties. 'The objective of these financial statements is to provide information about the reporting entity's financial performance and position that is useful to the wide range of users for assessing the stewardship of the entity's management and for making economic decisions. 'To be 'useful,' this information must be 'represented faithfully, should be complete, prudent and free from material errors at least.' The purpose of imposing regulations on accounting practices and setting standards is to fulfil the objectives of financial statements. In the accounting world there are several financial statements but the four main financial statements that are universally understood and prepared for most publically traded companies and many small and medium sized businesses are the income statement, the balance sheet, the statement of cash flows, and the statement of retained earnings (sometimes referred to as shareholders’ equity). A fundamental ability to properly interpret the information these statements contain allows internal and external users to make a wide array of decisions affecting company operations and decisions on whether or not to invest. Users of financial statements look to the income statement to learn and assess a company’s performance over a set period of time, often a month or a year. This statement depicts the company’s revenues and expenses with the difference reflecting the net income (or loss) resulting from the