Financial Statements of a Company

Financial statements are the summarised statements of accounting data produced at the end of an accounting process by an enterprise through which it communicates the accounting information to the internal and external users.

A SET OF FINANCIAL STATEMENT INCLUDE;

1).Balance sheet – It is a statement of assets and liabilities .i,e the financial position of an enterprise at a given date.

It is also known as Position Statement.

2).Statement of profit and loss – It shows the net result of  business operations during an accounting period.

It is also known as Income statement.

3).Schedules and notes to accounts – The Balance sheet and the statement of profit and loss are supported by the notes having details of items in the balance sheet and statement of profit and loss.

NATURE OF FINANCIAL STATEMENTS

The information and data include in the Financial statements are the result of combination of;

1).Recorded facts – its means recording of transactions based on evidences in the accounting books.

e.g. figures related to cash in hand ,cash at bank ,debtors,sales purchases, etc.,  are recorded facts.

2).Conventions – Certain accounting conventions are followed while preparing Financial statements.

3).Accounting Concept – Financial statements are prepared following the accounting concepts.

4).Personal Judgements – It also have an important bearing on Financial Statements.

FINANCIAL STATEMENTS  MAYBE USED BY USERS FOR DIFFERENT PURPOSES;

• Owners and managers require financial statements to make important business decisions that affect its continued operations.
• These statements are used as a part of  management’s annual report to the stockholders.
• Prospective investors make use of  financial statements to assess the viability of investing in a business.
• Financial analyses are often used by the investors and are prepared by professionals , thus providing them with the basis for making investment decisions.
• Financial Institutions  use them to decide whether to grant a company with fresh working capital or extend debt securities(long term bank loan) to finance expansion and other significant expenditures.

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