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ACC 561 Assessed Discussion Questions Week 2

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ACC 561 Assessed Discussion Questions Week 2
In what ways do the elements of the four elements financial statements interact with
one another?
There are four main financial statements and they are: balance sheet; income
statement; statement of cash flow statement and statement of shareholders’ equity.
The balance sheet show what a company owns and what it owes at a fixed point in
time. The assets reported on the balance sheet can be classed as either current
assets or fixed assets. The liabilities listed represent the portion of a firm's assets
that are owed to creditors. The equity is referred to as owner's equity in a sole
proprietorship or a partnership, and stockholders' equity or shareholders' equity in a
corporation. Income statements show how much money a company made and spent
over a period of time. The information reported on the income statement flows to the
statement of cash flow. For a given period, the statement of cash flow summarizes
sources and uses of cash; indicates whether enough cash is available to carry on
routine operations. It provides the sources of cash, uses of cash, change in cash
balance. The cash flow statement represents an analysis of all the business
transactions of a business, reporting where the firm obtained its cash and what it did
with it. The information used to construct the cash flow statement comes from the
beginning and ending balance sheets for the period and from the income statement
for the period. The fourth financial statement, statement of shareholders’ equity, also
known as the statement of retained earnings, explains the changes in the interests of
the company’s shareholders over time. Retained earnings appear on the balance

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