Question

While the Profit and Loss Statement provides a “moving picture” so to speak of the financial performance of an organization, two other statements provide critical information that completes the picture of the organization’s financial performance. The balance sheet “bookends” the period performance reported by the profit and loss statement, while the statement of cash flow links these two statements together. Discuss the importance of a thorough understanding of each of these two statements to a comprehensive understanding of the financial performance of an organization.

Answer 1

All over the globe these three statements

1) income statement

2) balance sheet

3) cash flow statement

As the given statement suggests "the Profit and Loss Statement provides a “moving picture” so to speak of the financial performance of an organization" the income statement (profit and loss statemnt) is to be generated by all the publice organisation which shows all the relative income and relative expences of the perticular financial year. thats why we usualy use the word "moving picture" as it shows the movement of business year by year.

Balance sheet is the most crutual part of financial statement of any organisation. It shows all the balances of assets, liabilits and owners fund it is prepared as on perticular date.

Cash flow satement is the statement use to watch over the flow of cash. It is the summari an entire cash recipts and cash payments of the period. the cassh flow statement formet is devided into three parts

1) operating activities

2) incesting activities

3) financing activities.

The balance sheet is the closing balance of all the assets and liability account whice are going to be cary forverded next financial year while the profit and loss statement shows all the income earned for the financial year and all the expences incured for the earning of that income by an organisation. Cash flow links balance sheet and profit and loss account as the cassh flows show net income of an organisation from operating activity also the purchase, sale, or other disposition of assets appears to both the sides balance sheet (as an asset reduction) and the income statement (as a gain or loss, if any).