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.
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 owners ' equity of the company at a specific point in time. The assets are the firm 's resources, financial or nonfinancial, such as cash, inventories, properties, and equipment. The total assets equal the sources of funding for those resources: liabilities and equity. Below is an example of a Balance Sheet;
ABC Company
Balance Sheet as at 31 Dec 2009
Assets S$ Equity and Liabilities S$
Fixed Assets Long Term Liabilities Machinery 12,000 Long term debts 18,000 Furniture and Fitting 4,000 Equipment 5,000 Current Liabilities Total Fixed Assets 21,000 Account payable 1,500 Accrued expenses 3,000
Current Assets Monthly Interest 1,260 Cash 5,000 Total Current Assets 5,760 Account receivables 2,000 Prepay expenses 1,000 Owner’s Equity 10,000 Inventory 10,000 Current Earning 5,240
Total Current Assets 18,000 Total Equity 15,240
Total Assets 39,000 Total Liabilities 39,000
The balance sheet is presented in two sides
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 owners ' equity of the company at a specific point in time. The assets are the firm 's resources, financial or nonfinancial, such as cash, inventories, properties, and equipment. The total assets equal the sources of funding for those resources: liabilities and equity. Below is an example of a Balance Sheet;
ABC Company
Balance Sheet as at 31 Dec 2009
Assets S$ Equity and Liabilities S$
Fixed Assets Long Term Liabilities Machinery 12,000 Long term debts 18,000 Furniture and Fitting 4,000 Equipment 5,000 Current Liabilities Total Fixed Assets 21,000 Account payable 1,500 Accrued expenses 3,000
Current Assets Monthly Interest 1,260 Cash 5,000 Total Current Assets 5,760 Account receivables 2,000 Prepay expenses 1,000 Owner’s Equity 10,000 Inventory 10,000 Current Earning 5,240
Total Current Assets 18,000 Total Equity 15,240
Total Assets 39,000 Total Liabilities 39,000
The balance sheet is presented in two sides