There are numerous purposes of financial statements. The different objectives of financial statements can be explained under the following heads:
Cash Flow Statements: The purpose of this financial statement is to keep an account of the different activities of the Council. It also provides information on the mode of generation of funds required for repayment. The cashflow statement also helps to analyse the amount of cash that would be required in order to meet the operating costs.
Income Statement: This type of financial statement keeps an account of the net surplus or deficits. The net surplus or deficit is calculated by considering all the activities in the last financial year. By having a detailed account of the past, one can forecast or assess the future performance of the company.
Balance Sheet: The balance sheet basically gives an idea of the financing structure of the company. With the help of this one can predict the funds that would be utilised in the future. It would further reflect the capacity of the firm to raise additional capital.
Financial Statement – Accounting Policies:
In order to make the financial reports serve their desired objectives, the users should keep the following aspects in mind:
The system of measurement that constitutes the basis of preparing the financial reports.
The accounting policies that underlie a particular item in the financial report should be clearly understood. This is more important in cases where there are alternatives to use a particular item in the financial report.
Any change in the accounting policy should be known to the users of the financial reports.
Notes to the Financial Statements:
The notes to the financial statement gives an in depth understanding of the financial performance of the company.
Last Updated on : 26th June 2013