Financial Statement DifferentiationEssay Preview: Financial Statement DifferentiationReport this essayFinancial Statement Differentiation PaperFinancial statements are important tools in providing information about companys fiscal condition. Financial statements are used for different purposes by different categories of people or organization, such as management, creditors, investors, IRS or other government agencies. There are four types of financial statements; the income statement, balance sheet, statement of equity and statement of cash flows. The paper will explain four different types of financial statements and discuss which financial statement (s) would be of most interest to investors, creditors, and management.
The Income Statement: Internal Revenue Service Form 526, Summary of Financial Reports and Forms of Debt. Internal Revenue Service Form 526, Summary of Financial Reports and Forms of Debt is the most widely used income statement, providing a simplified analysis of what income would be reported and a better estimate and identification of financial resources. Form 526’s summary of financial reports and annual report include information for individual business income reports by major financial institutions, the amount of debt and credit balance as a percentage of gross assets, loan balances, annual interest rates, and income taxes. Some organizations report only cash, loans, or savings accounts.
The Statement of Cash Flow: Annual Report of Financial Operations (ASOL) and GAAP (Adjusted Earnings Before Interest, Tax, and Earnings After Tax). annual report of financial operations (ASOL) can give a simple but useful and accurate picture of corporate cash flow. Annual report of financial operations (as of June 30, 2013), GAAP (adjusted Earnings After Interest), and a comparison of the financial statements of major banks, non-bank financial institutions, and non-financial corporations in the United States was done using ASOL (as of the December 31, 2012) and GAAP (adjusted Earnings Before Interest, Tax, Earnings After Tax), so it should be familiar to anyone familiar with ASOL and what it does. In summary, a general summary of the tax and accounting systems used in the United States is provided. While GAAP and ASRO have shown a much more robust picture, the fact remains that their interpretation and use of the numbers is a poor one. See the chart below for a more general summary of the tax analysis in each category by industry.
Source: IRS.gov Revenue Reports and Other Statistics for the American Association for the Advancement of Science
What is the Financial Statement? Financial Statement is often applied to financial statements. Financial statements are not financial instruments but are a way to analyze financial conditions. These financial statements contain information about cash flow, the financial situation, liquidity, financial condition, cash flows, operating performance, asset or financing requirements, liabilities, liabilities arising from transactions involving common stock, certain nonbank financial institutions, and other financial reporting factors. (For additional information on the sources of the financial statements, see: http://www.fiscalsecrecy.org/resources/tax/reform/)
Information about how to make the financial statements and other reports available
Additional Financial Statements
When a financial statement is made there are three primary information sources. First is information about the underlying financial position that the financial statement was filed. It takes the average of various financial sources (the estimated financial performance of the financial statement versus the actual performance of the financial statement against the actual operating results) and adjusts for the available variation in stock and liquidity that could contribute to the performance of the financial statement. Information about the actual results of operations can be adjusted for by changing the estimate of expected results of operations. However, as of June 30,
Income StatementThe income statements indicate the total expenses as well as sales of a company. It is also known as the Profit & Loss (P&L) statement because it shows the components of profit and loss for a specific period of time; subtotals for gross profit, operating income and net income after taxes. The income statement is used to provide information on the revenue, expenses, and ultimately the profitability of a company. A simplified way to express the information appearing on this statement is: Revenues- Expenses= Net Income (Money-Zine, 2011),
Balance SheetThe balance sheet shows the assets, liabilities and equity balances as of a given point in time. It will typically show the short-term and long-term liquidity and obligations of the company, as well as the leverage of the company and capital structure. The balance sheet includes the elements of the accounting equation: assets equal liabilities plus shareholders equity (Johnson, 2012).
The statement of equityThis financial statement shows the activity with the companys owners for a specified period of time. It will also show changes in assets and liabilities that do not impact income, such as unrealized gains and losses on securities, or increases and decreases in pension liabilities. This statement shows the changes in the shareholders equity account (Johnson, 2012).
The statement of cash flowsThe statement of cash flows shows the cash inflows and outflows of a business over a given period of time. It helps in analyzing the effects of Balance Sheet and Income Statement activity on the cash by breaking out spending into 3 main categories: Operations, Financing, and Investing (Working point, 2012).
Financial Statement (s) most interested by Investors, Creditors, and ManagementInvestors often be most interested the income statement, because it shows how much money the company has made over a certain period of time. It also shows its calculation of earnings per share, which is important to the investor in anticipating current and future dividends. A competent investor will