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Financial statement definition:

Financial statements (Financial statements) are prepared on the basis of daily accounting data, in accordance with the prescribed format, content and methods, and comprehensively reflect the financial status of the enterprise on a specific date and the operating results and cash flow status of a specific period Written documents. The role of financial statements:

 

  1. Comprehensively and systematically reveal the company’s financial status, operating results and cash flow in a certain period of time, which is conducive to the operation and management personnel to understand the completion of various tasks and indicators of the unit, and to evaluate the management performance of the management personnel in order to find problems in time and adjust the direction of operations. Formulate measures to improve the level of operation and management, increase economic efficiency, and provide a basis for economic forecasting and decision-making.

  2. It is helpful for investors, creditors and other relevant parties to grasp the financial status, operating results and cash flow of the company, and then analyze the company’s profitability, debt solvency, investment income, development prospects, etc., and provide them with investment, loans and trade. Basis for decision-making.

  3. It is conducive to satisfying the supervision of enterprise operation and management by finance, taxation, industry and commerce, and auditing departments. Through financial statements, you can check and supervise whether companies are complying with the laws, regulations and systems of the country, and whether there are tax evasion and tax evasion.

 

Composition of financial statements:

Balance Sheet (Balance Sheet) It reflects the outstanding status of corporate assets, liabilities and capital. Long-term solvency, short-term solvency and profit distribution ability, etc.

  1. Income Statement/Profit and Loss Account (Income Statement/Profit and Loss Account) It reflects the current corporate income, expenses, and the amount and structure of the gains and losses that should be recorded in the current profit.

  2. Cash Flow Statement (Cash Flow Statement) It reflects the ins and outs of corporate cash flow, which is divided into three parts: operating activities, investment activities and financing activities.

  3. Statement of change in equity (Statement of change in equity) It reflects the increase or decrease in the total amount of owners’ equity (shareholders’ equity) in the current period, as well as structural changes, especially to reflect the gains directly recorded in owner’s equity And loss.

  4. Notes to financial statements generally include the following items

  • The basic situation of the enterprise;

  • Financial statement preparation basis;

  • A statement of compliance with corporate accounting standards;

  • Important accounting policies and accounting estimates;

  • Explanation of changes in accounting policies and accounting estimates and correction of errors;

  • Description of important report items;

  • Other important matters that need to be explained, such as contingencies and commitments, non-adjusting matters after the balance sheet date, related party relationships and transactions, etc.