Accounting, The balance sheet and income statements

Accounting, The balance sheet and income statements

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The balance sheet and income statements are used in financial accounting because they are regarded as the most important financial statements. The Balance sheet lists assets and liabilities of the organization in a given financial period or fiscal year. An income statement was also known as Profit and loss statement and it’s a report for income and expenses over a specific period of time maybe quartile year.

In regard to performance an income statement shows how a company has performed by listing sales and expenses and the resulting profit or loss. A balance sheet summarizes thecompany’s assets liabilities and shareholders’ equity at a specific point in time to analyze how a company pays for things (Weygandt, Kieso, 2008). Income statements report operating results such as, sales and expenses. This allows investors to evaluate company’sperformance and gives a prospect on the way forward. The balance sheet on the other hand presents the strengths of a company which enables investors to factually calculate days of working capital. Balance sheets can also identify trends of how net profit is used, receivables and the payables.

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