Apa Format: 265 Words Cite At Least One Reference Response

Apa Format175 265 Wordscite At Least One Referencerespond To The Fol

Respond to the following: Dr. Susan Jones 4/30/22, 3:16 AM Class, By analyzing financial statements (either using horizontal or vertical analysis), a person can assess his or her financial condition and progress. The two most important financial statements are federal tax returns, income, and expense statements. Why do you think these are the two most important statements, Class?

Paper For Above instruction

Financial statements serve as fundamental tools for assessing an individual’s or organization’s financial health. Among these, federal tax returns and income and expense statements are often considered paramount. This significance stems from the comprehensive and insightful nature of these documents, which enable stakeholders to understand financial performance and compliance with tax obligations.

The federal tax return provides a summarized account of income, deductions, credits, and liabilities over a specific period. It not only fulfills legal obligations but also offers a clear overview of income sources and tax liability, which reflect-income-generating capacity and financial stability. Tax returns are scrutinized for accuracy and are often used by lenders, investors, and analysts to evaluate financial reliability, creditworthiness, and compliance. As such, they serve as an authoritative source for verifying income and assessing financial progress over time (IRS, 2022).

On the other hand, income and expense statements provide detailed insights into an individual’s or business's operational performance during a specific period. These statements highlight revenue streams, operating costs, and net income, offering a direct view of profit or loss. Analyzing these figures helps in identifying trends, managing expenditures, and planning future financial strategies. For individuals, these statements reflect their ability to generate income consistently, while for businesses, they are crucial in decision-making and strategic planning (Brigham & Ehrhardt, 2016).

The importance of these two statements lies in their ability to offer a holistic view of financial health. While income and expense statements focus on operational performance and cash flow, federal tax returns confirm actual income and ensure compliance with legal standards. Together, they complement each other by providing verified, detailed, and legally recognized financial data, making them indispensable for accurate financial assessment (Stickney et al., 2010).

Furthermore, these statements are accessible and commonly used by financial institutions, government agencies, and individuals themselves for decision-making purposes. They enable analysis of financial progress over time, facilitating informed decisions regarding investments, loans, or tax planning. Consequently, their combined use fosters transparency and confidence in financial evaluations.

In conclusion, federal tax returns and income and expense statements are deemed the most important financial statements because of their comprehensive nature, legal credibility, and ability to provide detailed insights into income, expenses, and financial stability. Their analysis is vital for assessing financial health, planning future actions, and ensuring compliance with tax regulations.

References

• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
• Internal Revenue Service (IRS). (2022). Understanding Your IRS Tax Return. IRS.gov.
• Stickney, C. P., Brown, P., Wahlen, J., & Schipper, K. (2010). Financial Reporting, Financial Statement Analysis, and Valuation. Cengage Learning.