NATURE AND PURPOSE OF FINANCIAL STATEMENTS
A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity.
For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. They typically include four basic financial statements, accompanied by a management discussion and analysis:
1.Balance sheet: also referred to as statement of financial position or condition, reports on a companys assets, liabilities, and Ownership equity at a given point in time.
2.Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a companys income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state.
3.Statement of retained earnings: explains the changes in a companys retained earnings over the reporting period.
4.Statement of cash flows: reports on a companys cash flow activities, particularly its operating, investing and financing activities.
PURPOSE OF FINANCIAL STATEMENTS
"The objective of financial statements is to provide information about the 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 may be used by users for different purposes:
* Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of managements annual report to the stockholders.
* Employees also need these reports in making collective bargaining agreements (CBA) with the...