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For business people, they are certainly very familiar with the ins and outs of the financial statements. This is indeed very important, because the pros and cons of a report will be a determining factor for your business continuity. For this reason, making a report cannot be done as long as it is necessary and needs adequate research and competence.
Understanding Financial Statements
The definition of financial statements according to Financial Accounting Standards or GAAP is a part of a complete financial reporting process, which consists of a balance sheet, income statement and statement of changes in financial position. So through this report, my business can see quantitative information related to the company's financial condition and the changes it has achieved in a certain period.
In addition, a report related to company finance can also be used as a medium to see the company's overall financial condition and position and analyze the company's future. From this definition it can be concluded that the financial statements are information that records all business transactions over time so as to provide an overview of the achievements and economic conditions of a company.
Function of Financial Statements
For a company the function of financial statements is very important. The first function is to find out the company's position and control it. After knowing the general picture regarding the company's financial condition, management will find it easier to consider the next step.
The function of the second financial statement is for consideration of planning corporate activities. In addition to containing financial information, a company condition report also illustrates the company's ability to do a job, which can then be used as a consideration in planning an activity in accordance with the company's financial condition so that it does not experience losses in the future.
The next function is as a basis for making decisions related to the company. This third function can be seen from the two functions above which are basically as a basis or consideration for planning or deciding on an action to be taken. All of which aims to ensure the company's progress and development in a better direction.
And the function of the latest financial statements is for consideration and accountability to external parties. As we know, a company can progress and develop if it has many investors. Investors will always monitor the condition of the company from the reports provided. This is where the financial information function, in addition to being responsible for the investment they receive, can also be a consideration for other investors in disbursing funds.
Types of Financial Statements
There are 4 types of financial statements that you should know, the first type of report is the Balance Sheet which is a tool used to measure the company's financial position which consists of assets and liabilities. The second type of report is the income statement. This report presents all the details related to the income earned by the company and expenses incurred during an accounting period for the company. From this report you can find out how much loss or profit gained by the company.
Next is the capital change report, which is a type of report that presents every information related to changes in a company's net assets that occur in an accounting period that is affected by profits and losses as well as the owner's capital transactions.
And the last type of financial statement is the cash flow statement, which contains information about all cash inflows and outflows related to all of the company's operational needs in one accounting period.
Description: Financial statements cannot be separated from the mandatory activities of companies that aim to obtain information related to all financial activities that occur in a company in one period.

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