How Financial statements of any business organisation helps in settlement of tax liability, facilitates in taking loans and acts as a proof in the court of law?
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Financial statements comsist of trading a/c, profit and loss a/c balance sheet and cash flow satement.
trading account shows direct income and direct expenses which is made ordinarily for their operations. from which gross profit are obtained and therafter this gross profit business expenses and income are adjusted for and netprofit are ontained which becomes the bases to calculate income tax.
further, balance sheet depicts the financial position of the enterprise which shows how strong company is in paying their debt and how efficiently they are using their resourcre to maintain their going concern.
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