Financial Statements

well a financial stat is one where we get to know all or possibly most of activities and details ........so managers will take in interest in these statement(trading,p&l,appropriation ,cash flow n balance sheet) to take corrective measures or to forecast for the future.

To measure the size of the business, this will also help assess the riskiness of the business, apart from size, the nature of the business needs to be taken into account: a gold prospecting business will have different level of risk and return than a building society.

The economic, social and political environment, examples of the way in which the economic, social and political environment affects industry can be found in virtually any daily paper.

The industry trends, effects of changes in technology, in order to make any judgements about performance and more especially about the future, it is important to understand the way that the industry is going.

Statement of financial position helps projections and predictions of the future, financial analysis must relate not just what's happening in present but also what will or is going to happen in the future.

This will also effect of price changes from affects of technology to a more specific factor for example, the price of property has risen faster in recent years, which has raised general changes in prices.

Finally this information can be collected from the following statements and explanatory material from the income statement, the balance sheet, the accounting policies statement, the cash flow statement and the notes to the accounts.

we can easily see that its a financial statement that means finance is the main reason for whom we are going to make statement. so the impact is surely very much. we cant do anything without the finance in a financial statement.it is like the mother of the statement.or we can say a fish without the water. i hope this short example will help enough.

Net cash flow and net profit is not same due to inclusion of non cash items in net income that's why net income is adjusted for non cash items while preparing cash flow from operating activities.

The cash flow statement.

Cash flow statement means the cash inflow and outflow from business due to operating, financing and investing activities.

Dr Rent Expense

Cr Accrued Rent Expense (L)

(Rent Due)

then

Dr Accrued Rent Expense (L)

Cr Bank

(When it is paid)

Dividends are payments made to shareholders (owners) of a company. Dividends can only be paid if overall income has been positive otherwise it payment would constitute a return of investment.

On the Balance Sheet, dividends are listed in the Equity/Retained Earnings section.

Stakeholders, anyone who has an intrest in a business, are intrested in a companies profit and loss accounts for different reasons. Here are some examples:

Shareholder: To see how well the company has been performing and how therefore good their dividend payout will be

Government: Businesses performing well in country allows more money to be taxed from them and may attract other businesses from abroad

Staff: A financially sound business may be able to pay higher wages..

Mainly the look at them to see how much money they can extract out of the business.

Limitations of Conventional financial statements are as follows;

1. Companies may use different methods of valuation, cost calculation and recognising profit.

2. The balance sheet does not reflect the true worth of the company.

3. Financial statements can only show partial information about the financial position of an enterprise, instead of the whole picture.

The diffence in laymen's terms is all within the focus. If one is maximizing shareholder value, they are simply placing focus on what can raise value in the "short term" (increase stock price). If one is maximizing company value, they are looking from a different point of view which is usually on what you can really sell the company for, intangibles such as reputation, products in the works, workplace, etc. A person would be looking towards the future "long-term" outlook with this perspective.

GAAP allows for the fair comparison of accounting information. GAAP allows the work of the accountant to be scrutinized and analyzed on an even level with other similar firms. It allows for greater transparency in accounting practices.

GAAP Stands for Generally Accepted Accounting Principles. Accounting Standardards are issued by the Institute of Chartered Accountants of India (ICAI). This is the largest accounting body in the country. Now the Accounting Standards are 29.Accounting Standards are prepared by expert persons.Generally Accepted Accounting Principles means just like Accounting Concept which means every person can accept this principles.

You increase gross profit by by either increasing your sales or reducing the cost of goods sold.

the advantage is that it focuses on the differences between net income and net cash flows from operating activities. Meaning, it makes it more useful to relate the statement of cash flows and the income statement and balance sheet. Also it is less costly to change net income to net cash flow from operating activities.

in cash flow statement using indirect method actual net profit from income statement is adjusted for non cash items to arrive at actual cash from operating activities.

debit bad debt
Credit allowance for bad debt

Closing merchandise inventory belongs on both the income statement and the balance sheet.

On the income statement, it is included under Cost of Goods Sold; on the balance sheet it is categorised under Current Assets.

joint stock company

A subsidiary ledger contains the details to support a general ledger control account.

A subsidiary ledger records all the detailed data for any general ledger account that has many individual subaccounts.

What are some commonly used subsidiary ledgers?

accounts receivable

inventory

accounts payable

When there is parent subsidiary relationship exists and in that case if separate financial statements are prepared by both parent and subsidiary company those statements are called unconsolidated statements.

Consolidating shows detailed information by business unit of what makes up a total number, however Consolidated just shows the total figure. For instance if company Z owns company A, B and C, then the consolidating financial statements will show the details of company A, company B and Company C, whereas Consolidated financial statements will just show the total of A B and C.

Profit and loss is nothing but an statements which shows the net profit and net loss during a period.