What is the purpose of a balance sheet, income statement, and what does each communicate to the organization?© BrainMass Inc. brainmass.com March 4, 2021, 5:59 pm ad1c9bdddf
What is the purpose of a balance sheet, income statement, and what does each communicate to the organization?
The balance sheet is a statement of the financial status of a company. It reports assets and claims to assets on a specific date.
The Balance Sheet lists the items owned by a company (assets), the obligations owed (liabilities), and the difference between them (assets - liabilities) which is called the owner's equity. The items are named (such as inventory, long term debt etc.) and have a monetary amount associated with each item. This statement is prepared at a specific point in time (e.g. as 31st 2003 December, 30th September 2002).
The solution discusses the purpose of a balance sheet and an income statement, and what each communicates to the organization.