The Benefit of Understanding Financial Statements

March 16, 2012 — 931 views  

Financial statements are a primary document used by businesses to determine success and account for money flowing in and out of the organization's accounts. There are a variety of versions used, such as income statements, cash flow statements, operating activities, investing activities and statement of changes in shareholder's equity. Each one has its individual terms and accounts for separate property.

However, there are basic accounting concepts that can be applied to each type of financial statement. Under a consolidated balance sheet, current assets will be listed, as well as their worth. Financial statements are meant to be illustrative and provide a general representation of a company's economic outlook for the entire quarter.

A running balance sheet will sometimes consider item appreciation and depreciation in accordance to current market variable standards to determine the net loss or gain. A proper balance sheet will include variables such as intangible assets in the accumulated accounts section, otherwise business leaders may be unable to make educated decisions.

Consider the benefit of understanding financial statements in a business to determine the best course of action.