Question

After exploring the three big financial statements, the Balance Sheet, Income Statement and Statement of Cash Flows, identify the one you think you will use the most and write a one page paper defining the statement and explaining the information that statement contains and explaining how you will use that statement in the workplace and what valuable information the statement will provide.

Answer 1

Answer. After exploring the three big financial statements, the Balance sheet, Income statement and Statement of Cash flows, I mainly use Balance sheet because it show financial position at year end of an organization. The balance sheet is the most important of the above three main financial statements used to explain the financial health of a business.

Meaning of Balance sheet- This is one of the major financial statements used by financial statement user. This is also referred to as the statement of financial position. Balance sheet presents a company’s financial position at the end of a specified date. This is also a snapshot of company’s financial position at a point in time.

Contains of Balance sheet- Balance sheet of an organization include assets side and liability side, which include following items-

1. Assets side –

• Fixed assets like Furniture, buildings, lands, plant and machinery and intangibles assets like Goodwill, patent, copyright etc.
• Investments long term and short term.
• Current assets like inventories, cash, Bank balance, Debtors, Accounts Receivables
• Prepaid expenses, accrued incomes etc.
• Miscellaneous expenditure like deferred revenue expenses on research and development, preliminary expenses etc.

1. Liability side-

• Equity and preference shares capital
• Retained earning
• Debenture and long term loans, bonds
• Current liabilities like Accounts payable, bills payable, creditors etc
• Unearned income, outstanding expenses

The Balance sheet uses by me to analysis of an organization's financial position. The purpose of the balance sheet is to provide an idea about company’s assets and liabilities. From balance sheet we can estimate expected future earning capacity of an organization.

This financial statement also provide different valuable information about equity capital, Total debt, Retained earnings, current liabilities, fixed assets, current assets, quick assets, liquidity position. The balance sheet also show extract of statement of cash flow and income statement of an organization but these both statements does not show financial position.