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The Four Basic Financial Statements

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Prepare a paper in which you identify the four basic financial statements. Be sure to discuss how they are interrelated with each other, and why they are useful to managers, investors, creditors, and employees.

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Solution Summary

The four basic financial statements, the balance sheet, statement of retained earnings, income statement, and cash flow statement are discussed in approximately 600 words.

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The income statement, balance sheet and cash flow statement can all be clubbed under "financial statements" of an organization.

The four financial statements are:

1) Income statement
2) Cash Flow Statement
3) Statement of Retained Earnings
4) Balance Sheet

The income statement shows the profit/loss made by company during the financial year. It displays all the revenues earned by the company along with total costs incurred by the company for earning these revenues and thus, the sebsequent result of the operations of the company during a particular financial year. The profit or loss calculated by the income statement is added or subtracted from the statement of retained earnings. Statement of retained earnings, also known as Statement of owners' equity, is one of financial statements, it explains the changes in company's retained earnings over the reporting period.

Retained earnings appear on the balance sheet under "stockholders equity" and most commonly are influenced by income earned by the company and dividends paid out. The retained earnings account on the balance sheet is said to represent an "accumulation" because of the fact that the figure usually ...

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  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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