This is a presentation on Financial Statements which covers basic knowledge about financial statements including its importance and limitations.

1. FINANCIAL
STATEMENTS
Presented : Jatinjot Singh

2. CONTENTS
Concept Importance Limitations

3. 1. CONCEPT OF
FINANCIAL
STATEMENTS

4. Concept of
Financial
Statements
Financial Statements
Financial Statements are organized
summaries of detailed information
and are thus a form of analysis. The
type of statements accountants
prepare, the way they arrange items
on these statements and their
standards of disclosure are all
influenced by a desire to provide
information in a convenient form.

5. Nature of
Financial
Statement
The financial statements are prepared for
the purpose of presenting a periodical
review of report on progress by the
management and deal with the status of
investment in the business and the results
achieved during the period under review.
They reflect a combination of recorded
facts, accounting principles and personal
judgements.
The data shown in the financial
statements are greatly affected by the
following facts.
• Recorded Facts
• Accounting conventions
• Postulates
• Personal Judgement

6. ANATOMY OF FINANCIAL
STATEMNETS
Financial statements comprise two major statements, viz., Balance Sheet
and Income Statement. The balance sheet and the income statement are
usually followed by the cash flow statement and notes to the financial
statements. These statements are the record of operating performance with
its impact on financial position and progress of the enterprise.
1. Balance Sheet

7. 2. Income Statement
Income statement, also called Profit and Loss statement, is a
performance report which records changes in income, expenses,
profits and losses, as a result of business operations during the
year between the two balance sheet dates.
Income statement is commonly divided into four sections:
(1) Gross Profit Section.
(2) Operating Profit Section.
(3) Final Net Profit or Net Loss Section.
(4) Appropriation Section.

8. Importance of Financial Statement
1. Knowing Profitability of Business
2. Knowing the Solvency of the Business
3. Judging the Growth of the Business
4. Judging Financial Strength of Business
5. Making Comparison and Selection of Appropriate Policy
6. Communicating with Different Parties

9. Limitations of Financial Statement
1. Manipulation or Window Dressing:
2. Use of Diverse Procedures:
3. Historical nature:
4. Price Level Changes:
5. Subjectivity & Personal Bias:
6. Lack of Regular Data/Information:

10. THANK YOU