Question

List three financial statements that are used to communicate financial accounting information to interested external parties. Briefly explain the information that each provides. Explain how you might use them as IT manager internally with your organization and department

Answer 1

The Balance Sheet, Income Statement, and Cash Flow Statement are key financial statements used for communicating financial information externally and for internal management decisions in an IT department.

Step-by-step explanation:

Three financial statements used to communicate financial accounting information to interested external parties are:

1. Balance Sheet - provides a snapshot of a company's financial position at a specific point in time, detailing assets, liabilities, and equity.
2. Income Statement (or Profit and Loss Statement) - shows revenue, expenses, and profits over a period, indicating the company's financial performance.
3. Cash Flow Statement - reports the cash generated and used during the time interval specified in its heading, divided into operations, investing, and financing activities.

As an IT manager, these documents are crucial for internal decision-making. Balance Sheets help assess the financial health to justify IT investments; Income Statements reveal the profitability of the firm, influencing budget allocations; and Cash Flow Statements provide insights into the company's liquidity, which is essential for managing the IT department's cash flow needs.