FINANCIAL STATEMENTS

Importance
Uses
Principles of Preparation
Limitations
 POINTS TO BE COVERED
IMPORTANCE OF FINANCIAL STATEMENTS



TYPES OF STATEMENTS



USES OF FINANCIAL STATEMENTS



FINANCIAL STATEMENTS


What are they?



PRINCIPLES OF PREPARATION



LIMITATIONS



ON TARGET

Abbas Sheikh Dawood-101

Siddharth Devnani-302

FINANCIAL STATEMENTS
What are Financial Statements?
Financial Performance Analyzers

Language understandable by interested parties

TYPES OF STATEMENTS

FACTORS CONNSIDERED BEFORE
INVESTING
EVALUATION METHODS

1.Ratio Analysis
2.
3.Cash Flow analysis
4.
EVALUATION OF INVESTMENTS BY RATIO
ANALYSIS
ON TARGET

Bhavuk Chandak-103

IMPORTANCE
ON TARGET
IMPORTANCE
 Shows how a business
is doing

 Are very useful within
the organization for a
company's D e le te th is g ra p h ic
o r co p y it a n d u se it
stockholders and to o n a n o th e r p a g e o r
its board of directors, in a n o th e r
p re se n ta tio n .
its managers and
some employees,
including labour
unions.



 IMPORTANCE TO MANAGERS

A m o n g th e m a n y u se rs
M a n a g e rs a re th e m o st
b e n e ficia la n d fre q u e n t u se rs o f
fin a n cia lsta te m e n ts p a rticu la rly
th o se g o o d in a n a lyzin g a n d
u n d e rsta n d in g th e fin a n cia l
sta te m e n ts.

B u sin e ss M a n a g e rs d isco ve r
p ro b le m s in th e sta te m e n ts a n d
fin d th e a ctio n n e e d e d to b e
ta ke n a n d exe cu te s th e a ctio n s
p la n n e d .
ON TARGET

Dharmendra Choudhary-104

USES
 USES OF FINANCIAL
STATEMENTS
Financial institution s (banks and other lending


companies) use them to decide whether to grant

a company with fresh working capital or extend
debt securities (such as a long-term bank loan or
debentures) to finance expansion and other
significant expenditure and other duties declared
and paid by a company.


Media and the general public are also

interested in financial statements for a variety of
reasons. For example if any person wants to
become a shareholder in the company then the
financial statements of the company’s previous
years will help the person in checking the
creditability of the company

ON TARGET

Vaibhav Choudhary-301

PRINCIPLES FOR
PREPARING
Economic Entity Assumption


 The accountant keeps all the

owner’s personal transactions
different from the transactions of
his business.
Monetary Unit Assumption


 Any Economic activity taking

place is measured in U.S. dollars,
and the ones which can be
expressed in U.S. dollars are
recorded.
 accountants do not take into
account the effect of inflation on
recorded amounts.
 Time Period Assumption
 According to this principle it is possible
to report the ongoing activities of a
business in relatively short, distinct
time intervals such as the five months
ended June 31, 2009, or the 5 weeks
ended June 1, 2009.


 Cost Principle
 From an accountant's view point, the
term "cost" refers to the money spent
(cash equivalent or cash) when an item
was originally obtained, whether that
purchase happened 2 years ago or fifty
years ago.


 Full Disclosure Principle

 If certain information is important to an
investor or lender using the financial
statements, that information should be
disclosed within the statement or in
Going Concern Principle
 This accounting principle assumes that a
company will continue to exist long enough
to carry out its objectives and
commitments and will not liquidate in the
foreseeable future.
Matching Principle

 The matching principle requires that

expenses be matched with revenues. For
example, sales commissions expense
should be reported in the period when the
sales were made (and not reported in the
period when the commissions were paid)
Revenue Recognition Principle

 Under the accrual basis of accounting (as

opposed to the cash basis of
accounting), revenues are recognized as
soon as a product is sold, and not when the
money was received.
Time Period Assumption


 According to this principle it is possible to

report the ongoing activities of a business
in relatively short, distinct time intervals
such as the five months ended June 31,
2009, or the 5 weeks ended June 1, 2009.
Cost Principle


 From an accountant's view point, the term

"cost" refers to the money spent (cash
equivalent or cash) when an item
was originally obtained, whether that
purchase happened 2 years ago or fifty
years ago.
Full Disclosure Principle


 If certain information is important to an

investor or lender using the financial
statements, that information should be
disclosed within the statement or in the
notes to the statement.

ON TARGET

Shruti P Bihani-201

LIMITATIONS
QUANTATIVE BUT NOT
QUALATATIVE

L IM IT A T IO N S
REFERENCE TO CASE STUDY
THANK YOU
Abbas Sheikh Dawood-101
Siddharth Devnani-302
Bhavuk Chandak-103
Dharmendra Choudhary-104
Vaibhav Chaudhary-301
Shruti Bihani-201