Application of Financial Statement Essays - Financial Statements

Assignment #1 ? Application of Financial Statement Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life. According to Weygandt, Kimmel, and Kieso (2010), ?an income statement presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time? (p. 21). Using an income statement in one?s personal everyday life allows you to document and track monthly or annual income and expenditures for personal budgets. Income statements can be used to gauge your incoming funds and match them to the amount of funds that you?ve limited yourself to use for a determined amount of time. There are many beneficial incentives to using personal income statements. Using income statements is a great way to monitor both monthly and annual expenses. Just as income statements contain the list of expenses for a business (e.g. salaries expense, rent expense, and utilities); income statements can also be used on a personal basis to list one?s car payments, rent/mortgage, groceries, auto fuel and even entertainment. Monitoring monthly expenses, as well as income, income statements permits oversight of one?s financial health. You are able to see where you are spending in excess and where you can cut back on unnecessary expenditures. A well-structured and managed monthly or annual income statement will allow one to budget better and save more for those unexpected emergencies. Utilizing income statements to document and manage personal finances also ensures your records are in order for state and federal tax purposes. According to the Windes and McClaughry Accountancy Corporation (2011), ?Of the 142,823,105 total individual income tax returns with a filing requirement, 1,581,394 were audited. To translate the number into percentage, it is approximately 1.1%, slightly higher than the 1% rate for the previous year. Of the total number of individual income tax returns audited in FY 2010, 473,999 (30%) were for returns with an earned income tax credit (EITC) claim, which decreased from the 35.64% of all audited returns for FY 2009? (p. 1). Maintaining accurate accounts of income and expenditures can ease your tax filing preparations and support you if there is a possibility of being audited by the IRS. Using the same concept selected above, discuss how a business manager may benefit from an understanding of this statement. The income statement provides a business manager with insight into the profitability of the company. It is in the business manager?s best interest to understand the income statements to assist them in monitoring both their monthly and annual expenses. Both private and public companies have a fiduciary duty to use standard income statements and to pay taxes. In order to calculate taxes, you have to determine how much income the company makes. This is done by the use of income statements. Also, using income statements is a good way for a business manager and company owners to ascertain how the business is doing financially and what may need to be improved. Discuss how your understanding of the balance sheet and income statement may be applied to your current or future position. According to Weygandt et al (2010), ?a balance sheet reports the assets, liabilities, and stockholders? equity of a company at a specific date? (p. 21). A balance sheet is similar to a credit report. In my current position as a Contracting Officer?s Representative (COR) for the federal government, I administer contracts for software licensing. Keeping accurate records of my agency?s budget and expenses is vital in my position as a COR. One of my primary roles is to maintain financial management controls and coordinate with resource managers on all actions relating to funding. Relative to the contracts I manage and the balance sheet, the software is the asset and the balance owed to the vendor by the government who supplied the software is the liability. My agency also uses office supplies. The supplies purchased are the asset and of course, the bill owed to the supplier is the liability. I make every effort to maintain an error free ?credit report? when providing management with budg et and contract status. To assist me in managing the contracts and purchases, I maintain a detailed record of the agency?s