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Communication of Balance Sheets

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What do balance sheets and income statements communicate? What do statements of retained earnings communicate? What do statements of cash flows communicate? How do the primary financial statements work together? Why are they important to an organization?

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This solution explores the function of balance sheets, and what they communicate.

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What do balance sheets and income statements communicate? What do statements of retained earnings communicate? What do statements of cash flows communicate? How do the primary financial statements work together? Why are they important to an organization?

1. Balance sheet shows the financial position of the company on a particular date usually at the end of the particular financial year. Balance sheet informs us the amount of fixed assets, current assets, investments made, amount of shareholders' equity, long term debt and current liabilities of the company.
2. Income statement shows the financial results of the company for the particular financial year. It shows the profit or loss of the company for the particular financial period. It ...

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