FinancialStatementsUnit 11I.BalanceSheetII.IncomeStatementII.CashFlow Statement
Unit 11 Financial Statements Ⅰ.Balance Sheet Ⅱ.Income Statement Ⅲ.Cash Flow Statement
FinancialStatementsFor a businessenterprise,all the relevant financialinformation,presented in a structuredmanner andin aform easy to understand,are called the financialstatements.They typically include four basic financialstatements日Balance sheet:referred to as statement of financialpositionorcondition,reportson a company'sassetsliabilities,and ownershipeguity ata specifictime.口Incomestatement:referredtoasProfitandLossstatement(or a"P&L")reportson acompany'sincomeexpenses,andprofitsoveraperiodoftime.口Statement of retained earnings:explains the changesin a company's retained earnings overthe reportingperiod口CashflowsStatement:reportsonacompany'scashflow activities,particularly its operating,investingandfinancingactivities2
2 Financial Statements 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 Balance sheet: referred to as statement of financial position or condition, reports on a company's assets, liabilities, and ownership equity at a specific time. Income statement: referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period. Cash flows Statement : reports on a company's cash flow activities, particularly its operating, investing and financing activities
Forlargecorporations,these statementsareoftencomplex andmayinclude anextensiveset of notes to the financial statements andmanagement discussion and analysis.Notestofinancial statements are consideredan integralpart of thefinancial statements.All the financial statementsarebuilttobeused口togetherto present a complete pictureof acompany'sfinance3
3 For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements and management discussion and analysis. Notes to financial statements are considered an integral part of the financial statements. All the financial statements are built to be used together to present a complete picture of a company’s finance
Purposeoffinancial statements"The objective of financial statementsis to口provide information about the financial position,performanceand changesin financial positionof an enterprise thatis useful to a wide rangeof usersinmaking economicdecisions.Reported assets,liabilities and eguity are三directly relatedto an organization's financialposition.Reportedincomeand expenses aredirectly relatedto an organization'sfinancialperformance.口Financialstatementsshouldbeunderstandable,relevant,reliable andcomparable./
4 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. " Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance. Financial statements should be understandable, relevant, reliable and comparable
Financial statements are intended to be understandable byreaders who have"a reasonableknowledge of business andeconomic activities and accounting and who are willing tostudythe information diligently."Financial statements maybeusedbyusersfordifferent purposes.> Owners and managers require financial statements to makeimportant business decisions that affect its continuedoperations.Financial analysis is performed on these statementsto provide management with a more detailed understanding ofthe figures. They are also used as part of management's annualreporttothe stockholders5
5 Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. " 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 performed on these statements to provide management with a more detailed understanding of the figures. They are also used as part of management's annual report to the stockholders