Please describe each of the following in your own words - Please make a lenghty
ID: 2379299 • Letter: P
Question
Please describe each of the following in your own words - Please make a lenghty response and do not copy and paste from wikipedia or other online source. Thanks!
a.
What a transaction is.
b.
The name of each financial statement and what it shows.
c.
The accounting equation.
d.
Financial statement relationships.
Please describe each of the following in your own words - Please make a lenghty response and do not copy and paste from wikipedia or other online source. Thanks!
a.
What a transaction is.
b.
The name of each financial statement and what it shows.
c.
The accounting equation.
d.
Financial statement relationships.
Explanation / Answer
1)Any event that has a financial impact or has affect on finances of the business adnd must be recorded in books of Accounts is a Transaction.
2) the financial statements are:
Profit and loss A/c : It shows the operations and net income earned during the period.
Balance sheet : This shows the position of the business at a particular point of time.This is also known as Statement of Affairs.
Cash flow Statement: this shows the movement of cash during the period under various activities like operations, financing and Investing.
3) Assets = Liabilities + Share holders equity (or Capital) is the Accounting Equation
4)The income statement, balance sheet and cash flow statement are all interrelated.
The income statement describes how the assets and liabilities were used in the stated accounting period to continue the operations.
Balance sheet helps to give the full picture of Assets and Liabilities theat a company possess at a particular point of time.
Balance sheet uses Net profit from Income Statement and cash balance from cash flow to provide the complete picture of statement of affairs.
The cash flow statement explains cash inflows and outflows, and it will ultimately reveal the amount of
cash the company has on hand, which is also reported in the balance sheet.
By themselves, each financial statement only provides a portion of the story of a company's financial condition;
together, they provide a more complete picture.