Meaning of Financial Statements

Meaning of Financial Statements: Every business organization maintains the proper record of all its transactions during the year in order to keep proper track of its expenses and incomes. At the end of an accounting year, these organizations measure their business performance in terms of profits or losses. Apart from profits or losses, it is also interested in knowing the actual position of its assets and liabilities at the end of an accounting period. Thus, the records maintained by the organizations to ascertain the profits and losses and to assess the financial position of a firm on a particular date are referred to as Financial Statements. The accounting Process ends with the preparation of Financial Statements.

In other words, financial statements reveal the profitability and financial position of a business at the end of the accounting year. It provides financial information to various accounting users that help them in the decision-making and the policy designing process. It should be noted that the financial statements of an organization are prepared on the basis of Trial Balance. 


Also, Read

What is Revenue Income?

Revenue Income: Revenue incomes are those incomes that are earned in the conduct of ordinary and day-to-day business activities.

What is Capital Income?

Capital incomes are those incomes that do not arise in the normal course of business operations. Such incomes arise from the capital itself, without involving any production work. For example, the premium received from the issue of shares or debentures.

What is Capital Loss?

The capital loss is made good or settled against the capital profits. In case the amount of capital losses is more than the capital profit, then the excess amount is shown on the Assets side