Concept of Financial Statements

 There are many functions we performed in business accounting. These functions are to identify, record, classify, summarize and interpate transactions. Every function is important and plays an important role in business accounting. Among all interpate is the last and very important function that gives us information about financial position of organization. 

So we can say that the process in which we may know the financial position of organization this process is called financial interpatation. 

There are four types of Financial Statements. These are Balance sheet, Income statement, Cash flow statement and statement of retained earings. 

Objective

There are many objectives of Financial Statements. These objectives are as below-

1. To know actual financial position of organization. 

2. To forecast financial growth of organization. 

3. To know the current financial position of the organization. 

4. To take actual financial decision. 

5. To minimize financial fraud. 

6. To know effectiveness of management. 

7. To know the profitability of organization. 

8. To know short term and long term solvency of organization. 

9. To know the return of capital employed. 

Function-

There are many functions of Financial Statement. These functions are as below-

1. It provides financial data about financial performance of organization. 

2. It shows current financial status of organization. 

3. It also provides all financial data of organization that belongs financial activities of organization. 

4. It helps to evaluate the earning capacity of organization. 

5. It helps to make financial planning of organization. 

6. It also helps to make financial policy, rules, regulations and law of organization. 

7. It helps to get credit rating by credit rating agency. 

8. It helps to solve many financial disputes. 

9. It helps to safeguard the believe of shareholders. 

10. It also helps internal financial reporting. 

11. It also helps to evaluate financial performance of organization.