Page 139 - Book-keeping for Secondary Schools Student’s Book Form One

Basic financial statements

Chapter Seven

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Basic financial statements

Introduction

Basic financial statements provide business stakeholders, such as investors,
creditors, and managers, with a comprehensive understanding of a business
financial performance and position. They are essential tools for making informed
decisions, assessing profitability, solvency, liquidity, and overall financial health
of the business. In this chapter, you will learn concept of financial statements, an
income statement, a statement of financial position and how to prepare them. The
competencies developed will enable you to prepare the income statement and the
statement of financial position appropriately.

While there are five components of
Think
financial statements, but the focus is
How a shopkeeper can identify the on two, namely income statement and
amount of profit generated and the a statement of financial position. The
value of the shop in certain month. income statement, which is also known as
a statement of profit or loss, is prepared in
order to determine a profit or a loss made
Concept of financial statements by the business in a particular accounting
This section presents the meaning, period. On the other hand, the statement
purposes, and common users of financial of financial position which is also known
statements.
as a balance sheet, is prepared in order to
The meaning and purpose of financial show the financial position of a business
statements by considering the balances of assets,

The meaning of financial statements liabilities and capital.
Financial statements are statements that Some businesses, for example, companies,
are prepared periodically to present the are required by law to prepare financial
results of the business for the period. statements. For sole owners, financial

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