Financial statements Essay Example | Topics and Well Written Essays - 500 words

Financial statements - Essay Examplereport that measures the success of the company operations for a particular period of time and this is used by business and investment people to determine the profitability, investment value and creditworthiness etc (Keiso and Weygandt, 2007, p. 126). Income Statement summarizes revenues, gains, expenses and losses. Sales, fees, dividends and interest are parts of revenues, while expenses take forms of cost of goods sold, depreciation, interest, wages and earnings etc. Gains and losses are different types like sale of plant assets or investments, settlement of liabilities etc. Expenses are calculateed and revenue are credited, and the total of these substructure be a cabbage debit (loss) or net credit (profit). Income statement evaluates the past performance of the company and provides a basis for in store(predicate) expectancy and assessing risk or uncertainty.The Balance Sheet presents the financial position of the business through the main elements that are called assets, liabilities and stockholders equity (Davies and Pain, 2002, p. 49). Assets include those that can provide future economic benefits as a result of past transaction (plant, machinery, vehicles and all) and liabilities include those that are probable future sacrifices of economic benefits arising from present obligations- loan, overdraft etc- (Keiso and Weygandt, 2007, p. 173). Assets are regarded to be debit balances and liabilities and stockholders equity are credit balances. Balance sheet is always in a balance and hence it can be summarized asNeither balance sheet nor income statement show or directly analyze some of the key changes taken place in the financial position. They fagt show cash inflows and cash outflows that are in turn, highly important to know and assess the timing and uncertainty of cash flows. Cash-flow statement, instead, provides cash inflows and outflows and it calculates the net changes in the cash position of the business. It comprises of 1) operation activities which are cash effects of