What are the imp of preparation of financial statements?
Answers
Financial Statements comprises of
Profit and Loss A/C which is prepared to know the financial performance of the business entity
Balance sheet which is prepared to know the financial position of the company.
Financial statements are crucial for the smooth operations of an organization. To understand what is meant by financial statements, in-depth understanding of the economic activity of any business is of paramount importance. Financial statements are prepared after the data is collected from the organization’s accounting database.
Economic activity of a business deals with the purchase, sales, credit, debit, drawings, capital investments, shareholders, stakeholders, etc. A record (ledger accounts, journals, subsidiary books, etc.) of every economic and non-economic transaction of the business is maintained in order to determine the future steps to be taken.
Financial statements of an organization are its prime source of advice. Decisions, policies, amendments in objectives and other such crucial business-related strategies are formulated after intense scrutiny of the organization’s annual financial statement.