Question

Discuss the 3 types of financial statement in a buisness. Which one is the most valuable to financial management of the organization? and why?

Answer 1

Ans 1=The three types of financial statement are given below,

Balance sheets,

Income statements,

Cash flow statements.

Balance Sheet :

In producing your balance sheet, which is primarily a ‘glimpse’ of what a facility owns & what it owes at a given point of time, you would establish an outline presentation with assets, liabilities & shareholder’s equity as the chief ‘groups’. Always bear in mind the fundamental accounting equation of 'Assets = Liabilities plus Shareholder’s Equity'.

Liabilities are usually recorded based upon current / long-run due dates.

Income Statement :

An income statement is a record which depicts how much revenue a facility earned over a particular time period (normally for a year / some part of a year). It also depicts the expenditures linked with obtaining that revenue. The exact ‘bottom line’ of the statement normally depicts the facility’s net earnings / losses. This informs us how much the facility earned / lost over the period.

Cash flow statements:

Cash flow statements report a facility’s outflows and inflows of cash. This is essential because a facility needs to have sufficient cash on hand for paying its expenditures & for buying assets.

A cash flow statement depicts alterations over time instead of absolute dollar sums at a point of time. It utilizes & reorders the info from a facility’s income statement & balance sheet.

Ans 2= The most essential financial statement is the ‘statement of cash flows’, as it concentrates solely on alterations in cash inflows & cash outflows. This record provides an unambiguous insight of a facility's cash flows than the income statement, which can at times give skewed outcomes, particularly when the accruals are assigned as per the accrual basis of accounting.