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The Types of Financial Statements Prepared Accounting services are important in any business regardless of its size, this is important because the company will have healthy finances when its expenditure and earning are controlled. Accounting is also important because it makes the company legally compliant with the set laws and regulations. Financial statements are records of the financial activities of an entity; they provide an overview on the long-term and short-term financial condition of an organization. Financial statements should be prepared by an individual with an education in accounting, they should have the necessary skills and knowledge in the preparation of the financial statements, and this will ensure that they will prepare accurate financial statements that will portray the true and Fairview of the company’s financial performance. These financial statements ought to likewise be prepared at the right time and when they are required. Profit and loss accounts, balance sheets, statement of owners’ equity and statement of cash flows are the types of financial statements prepared by organizations. There are four different types of financial statements prepared by an organization, they are; statement of financial position, income statement, statement of owners’ equity and statement of cash flows. The income statement shows the difference between the incomes made during a specific period and the expenses incurred in that same period. The income statement has four components these are; sales, cost of sales, gross profit and operating expenses.
The Ultimate Guide to Bookkeeping
All the resources of an entity as well as the owners’ equity can be shown in the statement of financial position, it has key portions these are; asset where it exhibits the current assets and the non-current assets of the organization, there is liability section which exhibits the current and non-current liabilities of the organization, and it moreover has owners’ equity which shows what has been invested.
The Ultimate Guide to Bookkeeping
Changes occurring in the retained earnings of a company over a period of time can be shown in the statement of owner’s equity. The statement of cash flows shows how changes in the balance sheet and the income statement will affect the cash and cash equivalents. The financial statements prepared by the organization should be reliable and simple to grasp for the user. People from different walks of life will use the financial statements prepared by the organization. The organizations will have the ability to know its financial position when the financial statements are prepared by the accountant. Partners and also investors will have the capacity to know how the organization will be performing when they review the financial statements prepared. Investors doing their due diligence on the organization will know how it is performing by checking their financial statements , this will empower him settle on a choice on whether to invest on that organization or not.