Question

Explain the financial statements and , the main financial information are needed

Answer 1

Financial statements:- ​​​​​​ ​​​ Financial statement is a statement which includes the information regarding business activities and financial situation over the accounting period. It shows the performance of a business body.

The financial statements has mainly fours parts

1. Income statement
2. Balance sheet
3. Cash flow statement
4. Statement of Equity/ capital

The main financial information are required which used to prepare of all above the part of financial statements.

Financial information required for income statement:-

Income statement includes are information regarding revenues and expenses , gain and loss occurred during Accounting period. Income statement determines the net income/ loss of accounting period.

Financial information required for balance sheets.:-

Balance sheet is a statement that shows the financial situation of business entity at particular date ( generally at end of accounting period). It includes information regarding total assets like inventory,cash , account receivable, note receivable, building, land equipment etc and liabilities like Accounts payable, note payable, interest payable, loan payable, bond payable etc. It also includes information regarding share Capital and reatained earnings of business entity.

Financial information required for cash flow statement.

Cash flow statement includes information regarding cash transactions of operating, investing and financing activities of business.

Statement of Shareholders equity:- it includes information regarding equity capital transaction like share issued , purchase of treasury stock , drawing of capital ,ratained earnings etc .