Write a memo to Don Jones explaining the financial statements he should prepare at the end of each accounting period. Include a discussion regarding what information each report contains and how Don might use that information to manage his business.
Explain the steps in the accounting cycle.
you need to determine the basic financial statements and comment on each one. Include examples, such as account or account types. You should also discuss why the financial statements are important.
(please do not copy from library, use your own words)
To: Don Jones
RE: Financial Statement preparation and importance
The following financial statements are necessary in each reporting period to provide a clear picture of the total accounting activity for your company:
This statement shows the account values for specific moment in time (the date of the Balance Sheet.) The accounts shown in this report are the Assets, Liabilities and Owner's Equity accounts. As a group, these accounts are known as "real" or "permanent" accounts. The basic accounting equation is based on the function of these three types of accounts. (Assets = Liabilities + Owner's Equity).
The accounts on the Balance Sheet do not close out after any period end date; but rather they demonstrate the net sum of all transactions pertaining to these accounts since account inception. For example, assume that a person is balancing a checkbook. When considering the cash balance available, every transaction that has ever occurred must be considered in determining the available cash balance. At the end of a specific period, such as December 31, the account holder does not discard any balance remaining and begin again at zero for January 1. The account flows continually without a periodic date-related reset.
The Income Statement (sometimes referred to as the "Profit and Loss" Statement) contains every account not considered on the Balance Sheet. These three types of accounts are Revenues, Cost-of-Goods-Sold and Expenses. These accounts are referred to as "nominal" or "temporary". These accounts will be ...
The solution writes a memo to explain the financial statements. The steps in the accounting cycle is explained.