Thursday, January 20, 2011

Financial Statement


Financial Statement

The financial statements published by a company periodically help us to assess the profitability and financial health of the company. The two basic financial statements provided by a company are-
  • Balance sheet Statement: The balance sheet gives the list of assets and liabilities of a company on a specific date or at first gives us a picture of the company’s assets and liabilities. The major categories of assets are fixed assets and current assets. Fixed assets are those assets which are intended to be used up over a period of several years. Current assets are those assets which are intended to be converted into cash in the near future (within one year). The major categories of liabilities are outside liabilities and liability towards share holders. The outside liabilities are categorized as short-term liabilities. The short-term liabilities which are expected to be paid off within the next one year are known as current liabilities. The balance sheet indicates the financial position of a company on a particular date, namely the last day of the accounting year.

Profit and loss Statement: It’s gives us a picture of its earnings. The profit and loss account, also called income statement, reveals the revenue earned, the cost incurred and the resulting profit or loss of the company for one accounting year. The profit-and-loss account summaries the activities of a company during an accounting year.

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