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    Purpose of Financial Statement

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    Rochelle is your friend, and an aspiring entrepreneur. She is having difficulty understanding the purposes of financial statements, and how they fit together across time. Write a one-page summary to Rochelle, explaining the purposes of each of the three main financial statements (balance sheet, income statement, and statement of cash flow), and how they are linked together in time.

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    Dear student,

    Financial statements consist of profit and loss account, Balance sheet and the cash flow statement. Profit and loss account shows the operating efficiency of the company and it shows whether the company has earned profit or loss during the particular financial year. Balance sheet depicts the financial position of the company on the particular date i.e., usually at the end of the financial year. Cash flow statement shows the cash flow from operation and the inflow and outflow of cash and shows the solvent position of the company.

    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 ...

    Solution Summary

    The purpose of financial statements are examined.