Page 272 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes every accounting period, each company comes out with a printed annual report which is a
public document. The annual report comprises of normally the following:
(a) Chairman’s statement.
(b) Report from board of directors

(c) Financial statistics.
(d) Financial statements.
(e) Auditors’ report.
(f) Major accounting policies.
(g) Consolidated financial statements (if applicable).

12.1 Nature of Corporate Financial Statements

The corporate financial statements are the financial reports or formal record of the financial and
business activities of a firm. The corporate financial statements actually give a summary of the
financial condition and profitability of the firm in both long- and short-term. The corporate
financial statements are generally complex in nature as they contain analysis and discussion on
the management decisions and financial statement notes. The financial statement notes define
each and every item in the balance sheet besides describing cash flow statement and income
statement in details.

!
Caution In India, every company has to present its financial statements in the form and
contents as prescribed under Section 211 of the Companies Act, 1956.

12.1.1 Objective of Corporate Financial Statements

The prime objective of corporate financial statements is to give information on the performance,
financial strength and financial position changes of a company. This financial statement is
valuable for the users while they go for economic decisions. The major criterion of a financial
statement is that it should be relevant, comparable, understandable and reliable. The financial
position of a company refers to the reported equity, assets and liabilities while the financial
performance of a company refers to the reported income and expenditures of the company. The
corporate financial statements are understood by those people who have significant knowledge
of economics and business activities.

12.2 Types of Corporate Financial Statements

The four basic types of corporate financial statements are:
 Income statement
 Balance sheet
 Statement of cash flows
 Statement of retained earnings

12.2.1 Income Statement

The income statements are also called as the profit loss statements. This statement gives
information on the result of various operations of the company over a term period. An income

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