An Introduction to Financial Statement: Balance Sheet, Income Statement (2024)

Financial Statements

In the preparation of final accounts of a firm, the financial statements display the net results for the given year. They play a vital role in allowing a user of a financial statement, to understand the results of a firm for a given year. Let us find out more about what a financial statement is and their relevance.

A financial statement is a formal record of the financial activities, and position of a business, person, or other entity. It is presented in a structured manner and in a form easy to understand.

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Need for Financial Statement Analysis

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Broadly, the following make up a part of the financial statements of any firm or organization:

As a whole, financial statements fulfil the following purpose, which makes them indispensable:

If a business has plans to issue its financial statements to outside users such as investors or creditors, the financial statements should be ideally formatted in accordance with one of the major accounting frameworks. These frameworks allow for some leeway in how financial statements can be structured, so statements issued by different firms even in the same industry are likely to have somewhat different appearances. Financial statements that are being issued to outside parties may beauditedto verify their accuracy.

Ques: Give examples of some users of financial statements.