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Application of Financial Statements

In: Business and Management

Submitted By mfaragalla
Words 1158
Pages 5
Abstract
This paper explores the uses of financial statements, specifically the balance sheet and income statement. It explores them from a personal point of view and how the balance sheet is used in an everyday life of an individual using his own assets and liabilities and determining his net worth. As it also discusses how a manager can benefit his company by understanding the concept of a balance sheet and using it to determine how well the company is doing and its ability to pay its debts and continue in the business. This paper also discusses my understanding of the balance sheet and income statement and how they may be applied to my future position of planning to start a small business.

Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life.
The accounting balance sheet is one of the major financial statements used by accountants and business owners. The balance sheet is also referred to as the statement of financial position. The balance sheet presents a company's financial position at the end of a specified date. Some describe the balance sheet as a "snapshot" of the company's financial position at a point in time. For example, the amounts reported on a balance sheet dated December 31, 2011 reflect that instant when all the transactions through December 31 have been recorded. (2012, Averkamp)
Because the balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. The major components of the balance sheet are: * Assets. * Liabilities. * Owner's (Stockholders') Equity. (2012, Averkamp) People are like businesses, we have assets (personal savings, investments, etc) and liabilities (mortgage payments,...

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