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What are financial statements? Give a brief about them.

Question by Sydney Mulunda On 19 March 2020, 18:15:36

Please write a genuine and meaningful answer to get a good ranking.

Answer by Sydney Mulunda On 19 March 2020, 18:25:19

Well, financial statements are financial  reports that give an overview of how a business or an organization is doing in terms of its finances. They show the performance of a business, whether it is making profits or not and also show its position in terms of the assets, liabilities and equity that it has. 

There are four types of statements namely: Statement of comprehensive income, Statement of financial position, statement of changes in equity and the Cashflow statement. The statement of comprehensive income shows whether a business is making profit or not while the statement of financial position shows a preview of the assets, liabilities and ownership of the business. It helps to show whether a business is a going concern or not. The Statement of changes in equity shows how the ownership of the business has changed in a particular period whereas the cashflow statement shows how the business has utilised the cash it has received and also shows the liquidity position of the business.

These statements are created and reported to reflect the performance of a company over a certain financial period, usually a year. These reports are created for the stateholders of the business who are the suppliers, shareholders, employees , customers and the government. The information they receive enables them make informed investing decisions depending on their interests with the business.

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