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ACC 561Financial Statement Differentiation Paper

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ACC 561Financial Statement Differentiation Paper
Financial Statement Differentiation Paper
It is important for organizations to communicate financial information that can be
easily interpreted, identified, and analyzed for business decision-making. According
to Kimmel, Weygandt, and Kieso (2009), “the four financial statements that are used
to communicate financial information are the income statement, balance sheet,
retained earnings statement, and the statement of cash flows.” In this paper the
subjects to identify are the information of each financial statement, which financial
statements that creditors, investors, and management are interested in, and the
reasons these statements are important to creditors, investors, and management.
Income Statement
The income statement is an important document because it contains information
about the success or Failure of a company. The income statement totals net income
by totaling revenue and subtracting total expenses in a specified period of time.
Revenues are anything that increases assets from the sale of the company’s
products or services such as sales revenue, service revenue, and interest revenue.
Expenses are any assets that have been used during the course of business to
increase revenue such as the cost of goods sold, advertising expenses, tax expense,
and rent payments. Investors and creditors are interested in a company’s income
statement because they can predict the company’s future income and earnings.
Management is also interested in the income statement because it not only shows
the company’s net income for the specified period of time but also allows
management to make important decisions regarding cutting costs and verifying
where excess funds may be needed.
Balance Sheet
The balance sheet is an important document because it is a report documenting a
company’s assets and their claim to any asset that they may not be yet paid for at a
specific point in time. The balance sheet is in the form of the basic accounting

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