Explain the Various Financial Statements Like Balance Sheet, Income Statement, and Statement of Cash Flow and Owner's Equity with Its Advantages and Disadvantages of Preparing This Statement with an Example.

1775 Words8 Pages
1. Explain the various financial statements like balance sheet, income statement, and statement of cash flow and owner’s equity with its advantages and disadvantages of preparing this statement with an example.

INTRODUCTION
Financial statements provide information of value to company officers and various external parties, such as investors and lenders of funds. Publicly owned companies are required to publish general-purpose financial statements that include a balance sheet, income statement, and statement of cash flows. Financial statements issued for external distribution are prepared according to generally accepted accounting principles (GAAP).

BALANCE SHEET
The balance sheet shows the value of the assets, liabilities, and
…show more content…
Though this statement, it gives the management guidelines in their decisions about future business strategies. Below is an example of an Income statement,

Profit & Loss Statement for DEF Company ended 31 Dec 2009 S$
Gross Sales 700,000
Less returns 10,000
Net Sales 690,000

Cost of Goods
Inventory, Jan 1 400,000
Purchases 300,000
Less Inventory, Dec 31 250,000
Cost of Goods Sold 450,000
Gross Profit 240,000

Less Expenses
Salaries 67,200
Utilities 12,000
Rent 30,000
Office Supplies 12,250
Insurance 3,900
Communication Expenses 2,800
Travel and Entertainment 2,650
Interest Paid 5,000
Repairs & Maintenance 7,250
Total Expenses 143,050

Net Profit 96,950

The statement is divided into three sections namely revenues, expenses, gains and losses. Revenues are inflows financial assets into the company; it is generally sales gain from the services or product that the company provides. Expenses, on the other hand, are outflows like cost of selling, delivering, producing goods and services, or operating cost. When the company is a manufacturing enterprise, the cost of goods sold has to be determining to sales for the period. It is the sum of

More about Explain the Various Financial Statements Like Balance Sheet, Income Statement, and Statement of Cash Flow and Owner's Equity with Its Advantages and Disadvantages of Preparing This Statement with an Example.

Get Access