Question

 

List the four financial statements and explain each one. What does each statement tell us? Provide an example of each statement using a corporation. Next, explain the connections between the financial statements.

 

Answer 1

Four type of financial statement would be balance sheet and income statement and statement of shareholders equity and Statement of cash flows.

Balance sheet is statement of assets and liabilities and it is reflecting the financial position of the company at a particular date and it is representing the various assets owned by the company and liability is owed by the company along with equities.

Income statement and statement of profit and loss related to a company over a particular period of time and These profit and loss will be reflecting the ability of the company on operational front to generate profits.

Statement of cash flows will be reflecting the cash flows from operational activity along with cash flows from investing activities and cash flows from financing activities to reflect the ability of the company to generate the cash flows in the shorter term and the longer term.

Statement of equity will be reflecting the position of equity shareholders into the company and changing in the equity at a particular period of time.

There is an interrelation between these financial statements because these financial statement will be helpful in order to determine the position of a company in relation to the Assets and liabilities along with the cash flows and the profits so these will be helpful in order to make various decisions related to maximization of the organisational value in the long run.