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5. Preparation of financial statements

Financial Statements present the financial information relating to financial affairs of a firm. The financial statements supply the necessary financial information to the users of financial statements viz. shareholders, creditors, investors, social investigators, government and other organisations for their own interest.

The financial statements provide the summary of income and expenses in the form of income statement for a particular period and assets, liabilities and net worth of the organization as on a particular date. Since the financial statements show even the common purposes of the users of accounting information, they are considered as useful tools in their hands.

The financial statement consists of:

(a) Income statement or Profit and Loss Account,

(b) Statement of financial position or Balance Sheet,

(‘c) Statement of cash flows

(d) Statement of equity

(‘e) Other supporting schedules in preparation of above statements

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