Question

advantages and disadvantages of proforma of income statement and balance sheet

Answer 1

advanatages of income statement

1) it gives detail information about revenu: it prodvides detail information about reveunes ,but also for cost of goods sold ,employee exp, operation exp,it provide revenue infomation from sale of goods and other income sources

2) provides database to investor for taking economic decsions: it proived deatils information about componay pefromance ,ie operaiton efficney, grooss profit , net profit,operational and non operational apsects also.all this information hepls investor to take proper decision

Disadvanates of inocme statement

1) provides mispreseantion of data : it provides renue earned from sales including those sales which have been made on credit which may or may be not recovered fully in futrue thus gives rosy positive of inocme statemnet

advantae of balance sheet

1) while applying loan the banker first consider balance sheet datat such as debt euqtiy, profit rationhs, sales ratios etc on the basis of which credit worthines of borrorwer is deicied and then only loan is sanctioned

2) oln the basis of finacali statemetn investor take the deicison whetetr to invest in the company or not

dis advantages

1) fixed assets of company are shown at historical cost but its actaully fair vaule mjight be very high or very low thus it does not reflect true weatlh of company. depreciaton is also calcultaed on aribiraty bais which also affefcts its true value whhich is incorrecf

)2) it coniser only those asses whifch can be expreessed in monetary terms ie what about human resources it is one of the most valuable asset of the compoany but no vaulaiton is made for them it is never shown as assets

THANKS IN ADVANCE FOR GIVING ME POSITIVE RATINGS

MAY GOD BLESS YOU

STAY HOME STAY SAFE

HAVE A WONDERFUL DAY