The Balance Sheet and Income Statement Use in Everyday Life – Assignment Example

The paper "The Balance Sheet and Income Statement Use in Everyday Life" is an outstanding example of an assignment on finance and accounting.
Question1 Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life.
Both balance sheet and income statement are very helpful in daily life, whether one is trying to keep an eye on his/her expenses or become an intelligent spender. According to Weygandt, Kimmel, & Kieso (2010), income statement helps in identifying the revenue and expenses, thus viewing the net profit or net loss of the company for a specific period of time. It can be said that the income statement would be more useful in everyday life because it would list all the revenue and the expenses that are incurred in a monthly and annual basis. Income statement would include all the list of expenses such as rent, utilities, car payments, groceries, fuel, entertainment expenses, etc. The person can also analyze the unnecessary expenditures too.
It would further assist in organizing the lifestyle of a person and facilitate in ensuring that the bills are paid on time. It would also help in keeping track of the money and check the habit of overspending. Moreover, saving money is encouraged through maintenance of an income statement. Income statement would definitely improve the financial position of any person, as it guides people to manage their daily financial needs and expenditures.
Maintaining a well-structured income statement also helps in federal tax purposes. Maintaining accurate records of the incomes and expenditure can also ease the task of tax filings and also supports if there is any possibility of such being audited by the Internal Revenue Service department of the US. So it can be concluded that those balance sheet and income statement both are important for conducting business, but in everyday life of an individual income statement plays a more important role (Weygandt, Kimmel & Kieso, 2010, p. 21-23).  Question 2
Using the same concept selected above, discuss how a business manager may benefit from an understanding of this statement.
Utilizing similar concepts, it can be said that the income statement helps in providing an insight into the business manager regarding the profitability and expenditure or loss of the company. The income statement assists the business manager to monitor the annual and also the monthly expenses. Both private and public companies have to maintain a well-structured income statement and pay taxes regularly. So in order to calculate the tax, the company has to determine the income. This can be done by utilizing the income statement. An income statement helps the business manager to ascertain the financial condition of the company and assist him in making projections for new development.
The income statement helps in comparing the past performance of companies with their current financial performance, and this information can be used for a variety of reasons. The company may want to recruit people and this can be ascertained by studying the past income statement, in which the peak periods of the company can be understood and additional people can be recruited during those times in advance so that the company can utilize those periods for generating maximum revenue. Even the drivers of expenditures can be evaluated to eliminate unnecessary expenses and reduce the internal cost of the company. Decisions regarding vendors, suppliers, or expenses on rent, etc could be made by viewing the income statement (Besley, Brigham, 2011, p. 235-236).

Question 3
Discuss how your understanding of the balance sheet and income statement may be applied to your current or future position.
Financial Statements help in summarizing the operation’s actions during a certain period of time. This may be for a quarter, half-year or annually. Currently, I am a student and income statement and balance sheet can be helpful to me in many ways. The balance sheet consists of the assets and liabilities. The assets side of the balance sheet would include the values of the properties owned by me and the liabilities side would include the debts. The relationship between the liabilities and assets would reveal the net worth of my financial position. The balance sheet would help in understanding my debts such as loans for purchasing a car, etc and the other liabilities such as my outstanding bills. The asset side would include the assets which I possess, such as a bike, gadgets, etc. It would also include my prepaid services for those I already paid the bills. So it can be said that the balance sheet would help me to understand my financial position at a specific point of time.
Income statement would also be useful because it would contain the detail list of my daily, monthly and yearly expenses. It would also include the sources and amount of the revenue that I have generated through part-time jobs, pocket money, etc. So an income statement would present a comparative analysis of my cash inflow with respect to the cash outflow. It would assist me in understanding my unnecessary expenses and also help me to save some money from my generated revenue (Thomsett, 2001, p. 247-249).