ASSIGNMENT-1

FINANCIAL
ACCOUNTING
SUBMITTED BY:
MUHAMMAD MATEEN
ROLL NO: 10-NTU-5045
MBA 1ST SEMESTER
SECTION ‘A’

SUBMITTED TO:
MR. EJAZ BAIG

NATIONAL TEXTILE
UNIVERSITY
What is the meaning of Financial
Statements? What are major
Stakeholders of these Financial
Statements?
FINANCIAL STATEMENTS
Financial statements are written reports/records that provide an indication of
an individual’s, organization’s, or business’ financial status. General purpose
of Financial Statements is to provide the information to the persons outside
the organization. A set of accounting reports is also called the Financial
Statements. The persons receiving these reports are called the users of the
financial statements.

Financial Statements consists of five main accounting reports as follows:

Balance Sheet

Income Statement

Cash Flow Statement

Statement of Changes in Owner’s Equity

Notes to the Financial Statements

1. Balance Sheet:

Balance Sheet of a company provides the Financial Position of that company

on specific date indicating the assets and liabilities of the company and the
amount of owner’s equity in the business. Typically, a company lists its assets
on the left side of the balance sheet and its debts and liabilities on the right.
Sometimes, however, a balance sheet has assets listed at the top, debts in
the middle, and shareholders’ equity at the bottom.
 Assets
Current assets
Cash, Accounts receivables, Notes receivables
Non-Current assets
Land, Buildings, Office equipment, Machinery, Vehicles
Liabilities and Owners’ Equity
Accounts payable, Notes payable, Accrued payroll and withholding
Long-term liabilities
Mortgage note payable, Owners’ equity, Common stock, Retained
earnings

2. Income Statement:

It is also known as the "Profit and Loss Statement" or "Statement of Revenue

and Expense".

Income Statement presents the information regarding the revenue earned by

the company in a specified time period and also shows the expenses of the
company in getting that revenue. It also indicates the profitability of the
business over the preceding year.

3. Cash Flow Statements:

Cash-flow statement provides a look at the movement of cash in and out of a

company over the same time period covered by the income statement. These
financial statements include information from operating, investing, and
financing activities. The cash-flow statement can be important in determining
whether or not a company has enough cash to pay its bills, handle expenses,
and acquire assets. At the bottom of a cash-flow statement, the net cash
increase or decrease can be found.

4. Statement of Changes in Owner’s Equity:

The statement of changes in owners’ equity may also be called the statement
of changes in retained earnings, or the statement of changes in capital stock. 
Changes in an entity’s equity between two balance sheet dates indicate the
increase or decrease in its net assets during the period. More it show the
beginning balance, additions to and deductions from, and the ending balance
of the shareholders' equity account, for a specified period.
A statement of changes in equity can be created for sole proprietorships,
partnerships or corporations. Sole proprietorships and partnerships follow a
similar format for their statements of changes in equity, while the corporation
format is slightly different. The purpose of the statement is to summarize the
activity in the equity accounts for the period.

5. Notes to the Financial Statements:

The notes to the Financial Statements are a series of notes that are referred
to in the main body of the financial statements.
The notes give further details on the numbers given in the accounts. The
importance of these numbers should not be underestimated. The accounts
are not complete without the notes. Investors who rely on the main body of
the accounts and ignore the notes are likely to find themselves misled.

STAKEHOLDER
Person, group, or organization that has direct or indirect stake in an
organization because it can affect or be affected by the organization's actions,
objectives, and policies.

Major Stakeholders of the

Financial Statements

The major stakeholders in a business organization include creditors,

customers, directors, employees, government (and its agencies),
owners (shareholders), suppliers, unions, and the community from
which the business draws its resources. All stakeholders are not equal and
different stakeholders are entitled to different considerations. For example, a
firm's customers are entitled to fair trading practices but they are not entitled
to the same consideration as the firm's employees.

1. Creditors:

Persons or entity to whom money is owed. Common classifications of a

creditor include (1) Secured: who has a legal right to take a specific property
of the borrower and sell it in case of a default. (2) Unsecured: who does not
have any such right. (3) Preferential or senior: who takes precedence over
other creditors in laying claim to a bankrupt borrower's property. (4) Junior:
whose claim is addressed after satisfying the claims of preferential or senior
creditors.

2. Customers:
(1) Person that receives or consumes products (goods or services) and has
the ability to choose between different products and suppliers/buyer. (2)
Persons directly served by an organization.

3. Directors:

1. General: Person who leads, manages, or supervises an organization,

program, or project.
2. Company: Appointed or elected member of the board of directors of a firm
who, with other directors, has the responsibility for determining and
implementing the firm's policy. He or she does not have to be a stockholder
(shareholder) or an employee of the firm, and may only 'hold the office' of the
director.

4. Employees:

Individuals who work part time or full time under a contract of employment,
whether oral or written, express or implied, and has recognized rights and
duties. Also called workers.

5. Government:

Body of people that sets and administers public policy, and exercises
executive, political, and sovereign power through customs, institutions, and
laws within a state.

6. Government Agencies:

Fiduciary relationship between two parties in which one (the 'agent') is under
the control of (is obligated to) the other (the 'principal'). The agent is
authorized by the principal to perform certain acts, for and on behalf of the
principal. The principal is bound by the acts of the agent, performed in
carrying out entrusted duties and within the scope of agent's authority.

7. Owner:
Proprietor of the business who invests the necessary capital in it and gives
the time and attention to it, takes the risk and is entitled to receive the profit
or ear the loss arising there from.

Person or Entity that possesses the exclusive right to hold, use, benefit-from,
enjoy, convey, transfer, and otherwise dispose of an asset or property.

8. Shareholders:

Individuals, group, or organization that holds one or more shares in a firm,

and in whose name the share certificate is issued. It is legal for a firm to have
only one shareholder. Also called stockholder.

9. Suppliers:

External person or entity that supplies relatively common, or standard goods

or services. Also called vendors.

10. Community:

Self-organized network of people with common agenda, cause, or interest,

who collaborate by sharing ideas, information, and other resources. Virtual
communities consist of participants in online discussions on topics of mutual
concern, or of those who frequent certain websites.

Group of common interests that arise from association.