Accounting and Finance Foundations

Unit 7

Accounting and Finance Foundations Unit 7: Financial Statements 542

Financial Statements

Chapter 18

Corporations also use their financial statements to create annual reports. An annual report is an outline

of a business’s financial status. Corporate managers develop the annual report to explain the company’s

financial results for the year to stockholders. The annual report has the following components:

n    The letter to the stockholders

n    Financial highlights

n    The four basic financial statements

n    Notes to the financial statements

n    A report of management’s responsibilities

n    Management’s discussion and analysis of earnings

n    The report of the certified public accountants (CPA’s)

In addition to developing financial statements to include in the annual report, accountants also prepare

interim financial statements throughout the year.

The notes to the financial

statements contain

information that aids

users in interpreting the

financial statements.

Student Guide