Page 159 - Book-keeping for Secondary Schools Student’s Book Form One
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Basic financial statements
decisions on whether to lend or not. The decisions. Financial statements include
bank would, for example, want to see the among others, statement of financial position
financial statements to assess whether (balance sheet), income statement, and cash
the business can repay the loan that it is flow statement.
applying for.
FOR ONLINE READING ONLY
The statement of financial position
Creditors presents a summary of the enterprise's
Creditors or payables are suppliers of financial position at a specific point in
goods or services, who sell goods or time, detailing its assets, liabilities, and
provide services to the business on credit. equity. It demonstrates the accounting
Creditors are interested in the information equation (Assets = Liabilities + Equity)
presented in the financial statements and shows how the business’ resources
because they want to assess the ability of
debtors to pay for the goods and services are financed. The income statement, on the
supplied on credit when due. other hand, presents the businesses revenues,
expenses, and net income (or net loss) over
Debtors a specific period, typically a quarter or a
Debtors or receivables are enterprises year. It reveals the businesses profitability
or individuals who purchase goods or by comparing revenue with expenses. The
services from the business on credit. cash flow statement illustrates the business
Debtors do not usually use the financial cash inflows and outflows during a given
statements of their creditors, but period. It categorising them into operating,
sometimes they need them (especially investing, and financing activities. This
cash flow statements) to check the statement shows the business ability to
capability of these creditors to regularly generate and manage cash, which is vital for
supply goods especially when dealing its sustainability and growth. Together, these
with tender businesses. basic financial statements provide a clear
and comprehensive picture of a business’
Summary financial performance and position, allowing
Basic financial statements are key documents stakeholders to gauge its profitability,
that provide a comprehensive overview solvency, and liquidity.
of a business financial performance and
position. These statements are crucial
for stakeholders, including investors,
creditors, and managers, to assess the
business financial health and make informed
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