UNDERSTANDING FINANCIAL STATEMENTS Research Paper

UNDERSTANDING FINANCIAL STATEMENTS - Research Paper ExampleA balance planing machine is split into three parts assets, liabilities and stockholders equity. Assets are the economic resources possessed by a firm. Liabilities are a firms debt or obligations to acquire its assets. Stockholders equity is the jibe value of a firms common stock in addition to the additional paid-in not bad(p) and retained earnings. A basic rule of finance is that all business transactions are enter on the balance woodworking plane at the dollar value actually decided at the sentence of the transaction. This suggests that, recording all of the firms transactions at their historic approach is the factor that the boodle worth of the firm illustrated on the balance sheet should not be mixed with the gross sales or appraised value. Net worth or stock holders equity on the balance sheet simply shows the difference between assets and liabilities (Bernstein & Wild, 2000).Income statement, which is also kno wn as the profit and loss statement, statement of trading operations or statement of income, is another major financial statement. Income statement couplingmarizes the firms revenues and expenses over a specified time, concluding with the nett income or loss for the period. The income statement is divided into three parts revenue, expenses and the net income. Revenue is cash inflows or acquiring of assets of a firm during a specified period. Expenses are the bombardment or using of the assets, or incurrence if liabilities during a specified period. Net income on an income statement is the total sum earned or lost by the firm during the accounting period. Using the accrual method of accounting, sales are documented on the income statement when the goods and/or services associated with those sales are delivered or shipped to the customer. The cost of goods sold is recorded on the income statement at the same time the sales are recorded. gross revenue and cost of goods sold are als o recorded in spite of of when the firm gets cash for the goods delivered