Question

You have been hired by ABC Company, Inc. to prepare their financial statements on a quarterly basis. Management of ABC Company, Inc. has asked you for a lesson on what information they can expect to find on each of the financial statements and if each financial statement has a unique structure / characteristic / template to help them remember.

In response to your client’s request, please provide:

1. A general description, in everyday language, of what management can expect to learn from the four basic financial statements and

2. One unique characteristic for each of these basic financial statements (i.e. perhaps a mathematical equation represented, reporting period, categorization of accounts show, etc.)

You are welcome to write in sentence format and/or use bullet points but make sure you include both responses (1 and 2 above) for each of the four basic financial statements. Please be sure to proofread your responses before submitting.

Answer 1

Four basic financial statements and their meaning with one unique characterstic are as below:-

1.) Income Statement - In general language it tells you about the revenue generated and the expenses made and the profits made by the company in a particular period.

Unique characterstic - gives operating results of a company.

A complete profits explanatory statement.

2.) Balance Sheet - It tells the assets and liabilities in hand at the end of the period.

Unique characterstic - liquidity and capitalization of the company.

A comparative statement for the analysis.

3.) Statememt of Cash Flow - It explaines the cash recieved and paid into different activities i.e. operating, investing and financing.

Unique characterstic - liquidity with cash and cash spending and earning avtivities.

Mathatical calculation based

4.) Statement of Retained Earnings - It explaines the change in the equity during a period and the actual profits earned and saved or which increased or decreased the companies capital.

Unique characterstic - actual withholding in the capital and changes.

Current situation analysis