To discuss: The four financial statements.
Introduction:
Financial statements record the financial activities and financial positions of the business.
Answer to Problem 1P
The financial statements of a company are classified into four types:
- 1.
Balance sheet - 2. Income statement
- 3. Statement of cash flows
- 4. Statement of stock holder’s equity
Explanation of Solution
Balance sheet shows the detailed information about a company’s assets, liabilities and shareholders’ equity.
Income statement is the report of a company’s expenses, income, profits for a particular period.
Statement of cash flows deals with a company’s cash flow activities in the areas of operating activities, investing activities and financial activities.
The document, which is issued by the company as a part of balance sheet is termed as the statement of
Instructions to be followed to maintain the accuracy of the above statements:
- All the companies should follow a particular format of rules and regulations while preparing the reports.
- A private party such as an auditor have to be appointed to check the accuracy of the financial statement.
- The statements must be in accordance with GAAP (generally accepted accounting principle).
- In addition to the role of auditors, The SO act needs CEO and CFO to attest the accuracy of a statement and to sign it.
Thus, the financial statement reveals the financial position with the help of the above-mentioned statements.
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Chapter 2 Solutions
EBK CORPORATE FINANCE
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