Question

The stakeholders of every business -- employees, managers, owners, governments, the public -- want information about the firm's financial health. Accordingly, companies maintain three basic financial statements reflecting that firm's activity and financial condition.

1. What are those three statements and what information do they contain? Be specific.

2. Discuss the kinds of accounting specialists that participate, and those that may not participate, in preparing those statements.

Answer 1

Question 1

The Financial Statementsre that the Stakeholders interested in are listed as follow :-

1.Balance Sheet or Statement of Financial Position-

It depicts the status of assets, Liabilities and equity position of the company at the end of an accounting period. It helps them.to compare it with previous year results and make a decision for this various purposes.

2. Income Statement

It depicts the income that an Enterprise generate over an accounting period to analyse the sources of it's revenues and area where those revenues are applied or more commonly to know the expenses for analysing the profit earning capability of the business.

3. Statement of Cashflows

It helps various user to analyse how well the companies generates cash and the capability of the company to generate Cashflows in the future also.

4. Statement of Changes in Equity

It is the statement which depicts the changes in the equity, retained and surplus over the various accounting period. It helps the users to analyse the owners own capital in the business and application of the various business surplus.

Question 2

The preparation of financial statements is being done by the Management of the company.

On specific basis there is a dedicated accounting department behind the preparation of financial statements. There are various specialists like Chartered Accountants or Certified Public Accountant, Finance Manager, Accounts Executive or Manager etc who are actively involved in the preparation of financial statements.Also there are specialists like project manager, companies secretary etc are those persons who are not involved in the preparation of financial statements.