Financial statements

1. ACCOUNTING
Know the financial statements of the entity as represented for in
accounting.
By Siphelele Mtshali

2.  Financial statements are used by investors, customers or
businesses in analyzing the financial performance or situation of
the entity.
 For example, investors uses financial statements in order to decide
whether to or not to invest their money in a business, as a results
of its financial performance.

3.  Statements of profit or loss
 Statement of financial position
 Statement of changes in equity
 Statement of cash flow

4.  Statement of profit or loss
 Is a financial statement that summarizes the revenue, cost and expenses
incurred by an entity during a specific time period, usually 12 months.
 All the transactions related to income, costs and expenses are recorded
in this statement, so as to determine whether an entity made profit or
loss at the end of the financial year.
 (Profit): An entity makes a profit if its income/revenue is greater than its
cost and expenses.
 (Loss): An entity makes a loss when its income is lower than its
expenses.

5.  Statement of financial position
 This statement is also knows as the balance sheet.
 It measures all the entity’s assets, liabilities and equities.
 It purpose is to determine if the entity is in a good or bad financial
situation.
 When assets are greater than liabilities, the entity is regarded as in a
good situation.

6.  Statement of changes in equity
 Details the change in owners' equity over an accounting period by
presenting the movement in reserves comprising the
shareholders' equity…Increase or decrease in share capital reserves.
 Investors refers to this statement in order to see the dividends they are
likely to obtain through their investments made in the entity.

7.  Statement of cash flow
 is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the
analysis down to operating, investing and financing activities.