Financial Statements

Hello Everyone, 

Our Today’s topic should have been the first of the chain, but it’s never too late J

So, Today we are going to focus on what a financial statement is. Let me add here a statement I heard recently that financial statements are scorecards. Every single figure is telling you a story behind it. You just got to start reading this story. Well, a formal definition of financial statements is something like,

Financial statements are a collection of reports about an organization's financial results, condition, and cash flows. They are useful for the following reasons: 

• To determine the ability of a business to generate cash, and the sources and uses of that cash.
•  To determine whether a business has the capability to pay back its debts. 
• To track financial results on a trend line to spot any looming profitability issues. 
• To derive financial ratios from the statements that can indicate the condition of the business.
• To investigate the details of certain business transactions, as outlined in the disclosures that accompany the statements

      Now coming to the major types of financial statements; they include 

•  Balance Sheet
• Income Statement
• Cash Flow Statement
• Owner’s Equity Statement

And now, one liner on each type of statement,

Balance Sheet presents the financial position of an entity at a given date. It is comprised of the following three elements: asset, liability and equity.

Income Statement also known as the Profit and Loss Statement, reports the company's financial performance in terms of net profit or loss over a specified period. Income Statement is composed of the following two elements: income and expense.

Cash Flow Statement presents the movement in cash and bank balances over a period. The movement in cash flows is classified into the following segments: Operating Activities, Investing Activities, and Financing Activities.

Owner’s Equity Statement also known as the Statement of Retained Earnings, details the movement in owners' equity over a period. The movement in owners' equity is derived from the following components: Net Profit, Share Capital Issued or repaired during a period, Dividend payments, Gains or Losses, Effect of change in accounting policy or effect of correction in accounting error.

  

Stay Good :)

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And in the end there is a message to me that I am not accepting so far

I’m sorry for all misdeeds
This is wrong because it has affected rather ruined you badly
In the future, I will be careful not doing like thi
Will you forgive please me? :(