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Asked a question 2 years ago

What do I need to know about financial statements?

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First you need to know which financial statements are important. They are:

  • Balance Sheet—shows the financial conditions of your business at a point in time
  • Statement of Operations (Profit and Loss Statement)—shows whether you made a profit during a specific period of time
  • Cash Flow Statement—shows what happened to your cash position during a specific period of time

You should have a basic understanding of each of these statements. When compared with statements from prior periods, you can determine whether something is happening in your business that needs your special attention.

Your accountant can prepare these statements for you from the business data that you supply. There are also a number of computer software programs that will help you generate these statements from your input of regular transactions such as sales, collections, purchases, payments and payroll.

 

Financial statements are the  source of financial data  for the purpose of making decisions . That is why financial accounting  carries such a high weightage on the accuracy, reliability, and relevance of the information on these financial statements.

financial statements includes

income statement

statement of financial position

statement of change in equity

statement of cash flow

and the Noted (disclosure) to financial statements

 

The objective of financial statements is to provide disclosures  related to financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable and result oriented

 

The target of budget summaries is to give data about the money related position, execution and changes in monetary situation of an endeavor that is valuable to a wide scope of clients in settling on monetary choices." Financial results should  be justifiable, significant, solid and similar