FOUR BASIC FINANCIAL STATEMENTS Essay Example | Topics and Well Written Essays - 750 words

FOUR BASIC FINANCIAL STATEMENTS - Essay Example2. Balance Sheet The residual sheet, sometimes called the statement of financial condition, shows the financial condition of the company. It reflects both long- and short-term additions and liabilities of the company at a given point in time.3. Cash bleed Statement shows the cash inflows and outflows of the company. Cash outflows are subtracted from cash inflows to derive the terminal change in cash for the period, the statement shows how much excess cash was generated by the business after meeting all cash expenses for the period.4. Statement of Retained Earnings Also known as the reconciliation of net worth statement, shows the changes that have interpreted place in the companys retained earnings over the reporting period. How the total profit was used - to distribute among shareholders as dividend and how much was retained to increase net worth.Financial Statements report a companys past financial performance and current financial position. They are designed to provide reading on four primary business activities Planning, financing, investing, and operations (Bernstein & Wild, 2000). These statements provide an overview of a business profitability and financial condition for the period in review and over along term through compare with the earlier statements. All these statements provide the figures for the previous comparable period. For example the annual balance sheet will show the information of the previous year also. video display of the statements is so organised that anyone, studying the reported data, can readily determine what action should be taken, from that individuals point of view and need.Elements of financial statements are of two types those that reach financial position or status at a moment in time and those that represent changes in financial position over a period of time. Assets, liabilities, and fairness or net assets describe levels or amounts of resources or claims to or intere sts in resources at a moment of time. All other elements - revenues, expenses, gains, and losings - describe the effects of transactions and other events and circumstances that affect an entity over a period of time. The interrelation between the two types of elements is called articulationEach statement serves a specific purpose, and all four statements have an interlocking financial relationship.The two types of elements are related in such a way that (a) assets, liabilities, and equity (net assets) are changed by the elements of the other type and at any time are their cumulative result and (b) an increase or light in an asset cannot occur without a corresponding decrease or increase in another asset or a corresponding increase or decrease in a liability or equity. These relationships are collectively referred to as articulation. They result in financial statements that are fundamentally interrelated so that statements that show elements of the first type depend on statements th at show elements of the second type and vice versa (Carmichael, 2003).Financial statements of companies are complex documents and other essential information such as the comments of the management of the company (Directors Report) its Auditors certification that the accounts have been prepared faithfully and represent the true picture of the position and transactions of the company and, a series of notes which detail individual