question archive Write a 300- to 500- word paper where you explain the following in the context of the simulation: Name the four different financial statements  and describe each one in detail

Write a 300- to 500- word paper where you explain the following in the context of the simulation: Name the four different financial statements  and describe each one in detail

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Write a 300- to 500- word paper where you explain the following in the context of the simulation: Name the four different financial statements
 and describe each one in detail...
• In what ways do the elements of the four financial statements interact with one another?
• How might changing one of the financial statements affect the other financial statements?
• Why is it essential to understand the relationship between the financial statements?

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Looking at the question, I am assuming that the focus here is the relationships between the four statements,


(1) Balance sheet: It is a "photography" shot at a specific moment in time.  It reflects the company's condition in terms of: asset, liabilities, and owner's equity.  Every change in three other statements will be reflected in the balance sheet.

 

(2) Income statement: It is a "film" recording a period of time.  It reflects the profitability of the company in terms of the calculation for net income.  The net income number on the income statement is closed to the "Retained Earning" (or some other fashion) on the balance sheet.

 

(3) Cash flow statement: It records the changes in a company's cash.  It starts by taking the cash figure on the balance sheet in period 1, adding/subtracting changes from changes, to reach a final cash figure.  This ending cash figure must match the balance in the cash account on the balance sheet in period 2.


(4) Statement of changes in owner's equity: This is the easiest statement to prepare.  It takes the owner's equity figure on the balance sheet in period 1, adds/subtracts changes, and then arrives at the ending owner's equity figure.  This ending owner's equity figure must equal to the owner's equity number on the balance sheet in period 2.

Financial statements present a visual way to the viewer an organization's money, and where it came from, where it's going, and its current standing. The four important financial statements-balance sheets, income statements, cash flow statements, and statements of shareholders' equity-are such visual illustrations.

The balance sheet presents to the organization thorough information in regards to the assets, liabilities, and shareholders' equity. Income statements account for the total revenue received over a given time, usually a calendar year or a fraction of that year. It even demonstrates that total revenue's associated costs and expenses, as well as EPS (earnings per share) - thus allowing for a show if the organization has made a profit or not. Cash flow statements present the flow of cash coming in and out of the organization, showing whether the organization has generated cash. The statement of shareholders' equity presents adjustments of the organization's interests over a period of time.

 

These statements are all linked together. The balance sheet's assets and liabilities are mirrored upon the income statement's revenues and expenses - allowing a presentation of the organization's increase or decrease in gains/losses. Cash assets are presented by information stated in cash flows, seen on a balance sheet, which correlates with income displayed upon an income statement, although not entirely. The statement of shareholders' equity allows for a view of profits being earned and lost, shown on the other previous statements.

 

Changing one of the financial statements will greatly influence the other statements as they are all linked together - the supply and demand of cash flows, information on profits, etcetera. They disclose information that could affect individuals' financial decisions upon the organization.

 

It is important to understand the four main financial statements, as they can be used to an organizations advantage, offering information to an organization's owners, managers, and investors, allowing for a profitable management.

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