Question

After reviewing the three financial statements (balance sheet, income statement, and statement of cash flows), discuss which financial statement you find most useful. Explain why you have chosen this statement and provide specific examples of the information that the statement includes.

Answer 1

->Amongst the three financial statement the most useful financial statement is the Income Statement, however the selection or choice of most useful financial statement depends on the user of financial statement for instance from an employee perspective he will considered income statement as the most important financial statement whereas from investor perspective he will considered the balance-sheet of the organisation but considering the majority of users the Income statement is the most useful statement.

->Income statement is considered as most useful financial statement since it shows an organisation profit earning capacity further it gives detailed guidelines on the profit earned from normal operating activities and also for non-operating activities. Income statement shows the breakup of expenses into ordinary and extra ordinary activities becomes useful to the user to take necessary decision.

->Income statement information such as Revenue from Operations, Administrative Expenses, Cost of Goods Sold, Provision of Expenses in the books and also the net result of the organisation for a given time period.