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Financial statement: A financial statement is an organized collection of data according to logical and consistent accounting procedures.

Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a moment of time as in the case of a balance sheet, or may reveal a series of activities over a given period of time, as in the case of an income statement. Thus, the term financial statement generally refers to the basis statements; i) The income statement An income statement is a summary of the revenues and expenses of business over a period of time, usually one month, three months, or one year. It summarizes the results of the firm’s operating and financing decisions during that time. Due to income statement Operating decisions of the company apply to production and marketing such as sales/revenues, cost of goods sold administrative and general expenses (advertising, office salaries). It provides operating income/earnings before interest and taxes (EBIT) ii) The balance sheet Balance sheets provide the observant with a clear picture of the financial condition of the company as a whole. It lists in detail the tangible and the intangible goods that the company owns or owes. These good can be broken further down into three main categories; the assets, the liabilities and the shareholder’s equity.  Assets Assets include anything that the company actually owns and has disposal over. Examples of the assets of a company are its cash, lands, buildings, and real estates, equipment, machinery, furniture, patents and trademarks, and money owed by certain individuals or/and other businesses to the particular company. Assets that are owed to the company are referred to as accounts-, or notes receivables.

Current Assets include anything that company can quickly monetise. Such current assets include cash, government securities, marketable securities,

or services to the company on credit. furniture. Long-term liabilities are due to be paid in more than one year. Creditors (those that loan to the company) do not receive ownership in the business. sale of property. and notes receivable from officers and employees.   Current Liabilities are accounts-. such as patents. royalties. wages. exclusive contracts. copyrights.  Liabilities Liabilities are money or goods acquired from individuals. plant.accounts receivable.  . only a (usually written) promise that their loans will be paid back according to the term agreed upon. fixtures. Long-Term Liabilities are mortgages. Fixed assets are usually accounted as expenses upon their purchase.  Fixed Assets are long-term investments of the company. and/or other corporate entities. intermediate and long-term loans. and any other items with an expected useful business life usually measured in a number of years or decades (as opposed to assets that wear out or are used up in less than one year. and notes-. Other Assets include any intangible assets. Some examples of liabilities would be loans. leasehold improvements. and other obligations to creditors due within one year. They are normally not for resale and are recorded in the Balance Sheet at their net cost less (less is accounting term for minus) accumulated depreciation. and other payment obligation due to a creditor of the company. machinery. and any other item that could be converted into cash within one year in the normal course of business. equipment. current payment (due within one year) of long-term debts. taxes payable to financial institutions. inventories. salaries). notes receivable (other than from officers or employees). accrued expenses (eg. equipment loans. such as land. other intellectual property. prepaid expenses.

Losses during the operation of the business are subtracted from the shareholder’s equity. iii) A statement of retained earnings iv) A statement of charge in financial position in addition to the above two statement. to acquire assets and to start the business. or owners. or owners. are also added to the shareholder’s equity. Any net profits that are not paid out in form of dividends to the owner.Shareholder's equity The shareholder’s equity (also called as net worth or capital) is money or other forms of assets invested into the business by the owner. .