Impact of Financial Statement

Topics: Balance sheet, Income statement, Financial statements Pages: 3 (1021 words) Published: March 12, 2011
I.The impact of finance on financial statement
1.Basis financial statement
The management of company can control the financial of company through financial statements because it gives detail in all kind of financial record to management. There are three financial statements (i.e. Profit and loss statement, balance sheet, and cash flow statement). Financial statements should be understandable, relevant, reliable and comparable. Profit and loss statement (income statement): it reports all incomes, expenses in order to calculate the profit of company in the period of time. It gives information for internal and external stakeholder whether company makes profit or lost in one specific period of time. Based on income statement, manager can evaluate all kind of incomes and expenditure to give decision in order to make profit for company. Balance sheet: is a statement which records the asset, liabilities, debt and capital of on organization. The balance sheet is the only statement which applies to a single point in time of a business' calendar year. A balance sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time. Individuals and small businesses tend to have simple balance sheets. Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report. Large businesses also may prepare balance sheets for segments of their businesses. In addition, balance sheet is a measurement of both long-term and short-term of staying power of the. Therefore, manager and investor are given information about the ability to pay back the liabilities or debt, how many asset and capital company have through balance sheet. Cash flow statement: is a statement which gives more detail where a business gets capital, investment from and how and where the firm uses these capitals for. It is important for large company to prepare a cash flow statement. Cash flow provides information on a...
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