INTRODUCTION TO FINANCISL STATEMENTS

A financial statement is a collection of data organized according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a movement in time, as in the case of balance sheet, or may reveal a serried of activities over a given period of time, as in the case of an income statement. Financial statements are the out come of summarizing process of accounting. In the words of John N. Myer The financial statement provide summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and the income statement showing the results of operations during a period. Financial statements are prepared as an end result of accounting and the major sources of financial information of an enterprise. Smith and As borne define financial statements as, the end product of financial accounting a set of final statement prepared by the accountant of a business enterprise thate purport to reveal the financial position of the enterprise, thereslut of its courrent activities, and an analysis what has been done with earnings. Financial statement are also called financial reports. In the words of Anthonyfinancial statements, essentially are interim reports, presented annually and reflect a division of the life of an enterprise into more or less arbitrary accounting period more frequently a year,

Nature of financial statements

The financial statements are prepared on the basis of recorded facts. The recorded facts are those which can be expressed in monetary terms. The statements are prepared for a particular period, generally one year. The transactions are recorded in a chronological order, as and when the events happen. The accounting records and financial statements prepared form these records are based on historical costs. The financial statements, by nature, are summaries of the items recorded in the business and these statements are prepared periodically, generally for the accounting period. The American institute of certified public accountants states the nature of financial statements as financial statements are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the status of investment in the business and the results achieved during the period under review. They reflect a combination of recorded facts, accounting principles and personal judgments. The American accounting association expresses in its statement. Every corporate statement should be based on accounting principles which are sufficiently uniform, objective and well understood to justify opinions as to the condition and progress of business enterprise. Its basic assumption was that the purpose of periodic financial statements of a corporation is to furnish information that is necessary for the formation of dependable judgements. OBJECTIVES OF FINANCIAL SATEMENTS:

Financial statements are the sources of information on the basis of which conclusions are drawn about the profitability and financial position of a concern. They are the major means employed by firms to present their financial