Importance of Financial Statement in Decision Making
MPORTANCE OF FINANCIAL STATEMENTS TO THE GENERAL PUBLIC
Importance of financial statement is not what anyone can just keep aside without feeling the heat. A financial statement is very important in every society as many economic and financial decisions are made based on it.
WHAT ARE FINANCIAL STATEMENTS?
Financial statements are those sets of accounts that every quoted company / incorporation is mandated by law to produce for the benefits of its shareholders and other stakeholders. Financial statements have different components because those that have interest in the information it provides are diverse and cannot be satisfactorily represented in one single document.
Before I go on with the importance of financial statements, I would like to firstly list and briefly explain the components of financial statements.
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)
This is an important component of the financial statements that shows the current financial position of a company at a particular date. State of financial position contains information about the values of; assets, and liabilities.
STATEMENT OF PROFIT AND LOSS (PROFIT AND LOSS ACCOUNT)
As the name implies, it tells us whether a business is making a profit or loss over a period of time. Note that while the statement of financial position shows the state of affair at a point in time, statement of profit and loss shows the state of affairs over a defined period.
CASHFLOW STATEMENT
This document is included to allow us get insight into the ways the company manages cash and cash equivalent at its disposal. It tells you more about investing activities, financing activities and operating activities.
STATEMENT OF CHANGES IN EQUITY
This gives clear picture of movement of owners’ equity.
AUDITORS’ STATEMENTS
This document serve the purpose of assuring the users of the statement that the information that they are been served with fairly represents their interest.
DIRECTORS’ STATEMENT
The directors’ note
Importance of financial statement is not what anyone can just keep aside without feeling the heat. A financial statement is very important in every society as many economic and financial decisions are made based on it.
WHAT ARE FINANCIAL STATEMENTS?
Financial statements are those sets of accounts that every quoted company / incorporation is mandated by law to produce for the benefits of its shareholders and other stakeholders. Financial statements have different components because those that have interest in the information it provides are diverse and cannot be satisfactorily represented in one single document.
Before I go on with the importance of financial statements, I would like to firstly list and briefly explain the components of financial statements.
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)
This is an important component of the financial statements that shows the current financial position of a company at a particular date. State of financial position contains information about the values of; assets, and liabilities.
STATEMENT OF PROFIT AND LOSS (PROFIT AND LOSS ACCOUNT)
As the name implies, it tells us whether a business is making a profit or loss over a period of time. Note that while the statement of financial position shows the state of affair at a point in time, statement of profit and loss shows the state of affairs over a defined period.
CASHFLOW STATEMENT
This document is included to allow us get insight into the ways the company manages cash and cash equivalent at its disposal. It tells you more about investing activities, financing activities and operating activities.
STATEMENT OF CHANGES IN EQUITY
This gives clear picture of movement of owners’ equity.
AUDITORS’ STATEMENTS
This document serve the purpose of assuring the users of the statement that the information that they are been served with fairly represents their interest.
DIRECTORS’ STATEMENT
The directors’ note