In: Finance
Financial statement information provides the actual position of the business in terms of their financial structure and provide figures in the money terms about the business expenses and earnings and the financial statement is very useful for the external users of the company like shareholders , private lenders such as banks as debtors and borrowers of the company such as creditors and these statements are very helpful in analysing the financial strength by using financial ratios and leverages through which the shareholders may increase their investment in the company from which they expect for profits.
The Financial statement includes the statement of Trading account , Profit and loss account (Income statement) and balancesheet, the trading account helps in providing the operating profit which signifies that how much of ( Revenues after deducting the operating expenses ) amount is remaining as a operating profit and Income statement provides the net profit figure after deducting all administrative expense and the amount remains the net profit and then the final stage is the balance sheet which shows the financial position of the company at the end of the year, Assets and liabilities should be equally matched in order to get the correct results and the adjustment entries are made after identifying the errors and then rectify accordingly.