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24 views17 pages

ch 3 ppt afs

Uploaded by

rahulkarya commerce
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ANALYSIS OF FINANCIAL STATEMENTS

CHAPTER 3

08/09/21 PBK 1
FINANCIAL STATEMENTS OF A COMPANY
Financial statements are written records that convey the business
activities and the financial performance of a company. Financial
statements are often audited by government agencies, accountants,
firms etc. to ensure accuracy and for tax, financing or investing
purposes.

The financial statements are the end products of accounting process.


The statements and accounts which are prepared to ascertain the profit
earned or loss suffered and positions of assets and liabilities at a
particular date are known as Financial Statements.

08/09/21 PBK 2
Financial statements include
●
Balance sheet ( Position Statement )
●
Income statement ( Statement of profit and loss
accounts)
●
Cash flow statement

08/09/21 PBK 3
Nature of Financial Statements
i) Financial statements are recorded facts

ii) Financial statements are prepared on the basis of


accounting conventions

iii) Financial statements are based on certain basic


assumptions known as postulates

iv) Financial statements are based on personal opinion,


estimates and judgements
08/09/21 PBK 4
Objectives of Financial Statements
1. To provide information about economic resources and
obligations of a business

2. To provide information about the earning capacity of the


Business

3. To provide information about cash flows

4. To judge effectiveness of management

5. To provide information about activities of business


affecting the society

6. To disclose the accounting policies of business


08/09/21 PBK 5
TYPES OF FINANCIAL STATEMENTS

i) Balance sheet: The balance sheet shows all the


assets owned by the concern, all the obligations or
liabilities payable to outsiders or creditors and claims
of the owners on a particular date. It is called position
statement

08/09/21 PBK 6
08/09/21 PBK 7
08/09/21 PBK 8
08/09/21 tax PBK 9
PROBLEMS

08/09/21 PBK 10
08/09/21 PBK 11
Illustration 2

08/09/21 PBK 12
08/09/21 PBK 13
08/09/21 PBK 14
Limitations of Financial Statements
1. It do not reflect current market situation of of assets and
liabilities

2. Financial statements are the outcome of recorded facts so it


will be affected the personal judgements of accountants.

3. Financial statements show aggregate information but not


detailed information so it has less scope for decision making.

4. Balance sheet does not disclose information relating to loss of


markets, and cessation of agreements etc.

5. Financial statements contain only monetary information but not


qualitative Information

6. Financial statements are only interim reports.


08/09/21 PBK 15
Short Answer Questions

1. State the meaning of financial statements?


2. What are limitations of financial statements?
3. List any three objectives of financial statements?

08/09/21 PBK 16
THANKS

KRISHNAN PB
HSST COMMERCE
GGHSS PAYYANNUR
KANNUR

08/09/21 PBK 17

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