Explain in detail about the significance of the financial statements.
The importance of financial statements is mentioned below:
1. Provides Information: Financial statements provide information to various
accounting users both internal as well as external users. It acts as a basic platform for different accounting users to derive information according to varying needs. For example, the financial statements on one hand help the shareholders and investors in assessing the viability and return on their investments, while on the other hand, the financial statements help the tax authorities in calculating the
amount of tax liability of the company.
2. Cash Flow: Financial statements provide information about the cash flows of
the company. The financial statements help the creditors and other investors.in
determining solvency of company.
3. Effectiveness of Management: The comparability feature of the financial
statements enables management to undertake comparisons like inter-firm and
intra-firm comparisons. This not only helps in assessing the viability and
performance of the business but also helps in’ designing policies and drafting
policies. The financial statements enhance the effectiveness and efficacy of the
management.
4. Disclosure of Accounting Policies: Financial statements provide information
about the various policies, important changes in the methods, practices and
process of accounting by the company. The disclosure of the accounting policies
makes financial statements simple, true and enables different accounting users to understand without any ambiguity.
5. Policy Formation by Government: It needs information to determine national
income, GDP, industrial growth, etc. The accounting information assist the
government in the formulation of various policy measures and to address various economic problems like employment, poverty etc.
6. Attracts Investors and Potential Investors: They invest or plan to invest in the
business. Hence, in order to assess the’viability and prospectus of their investment, creditors need information about profitability and solvency of the business.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
This question is important because it tests key concepts from the NCERT syllabus and is frequently asked in CBSE exams.
This question is based on core NCERT concepts explained in the chapter and should be revised thoroughly before exams.
Students often lose marks by skipping steps, writing incomplete explanations, or misunderstanding keywords used in the question.
The importance of financial statements is mentioned below:
1. Provides Information: Financial statements provide information to various
accounting users both internal as well as external users. It acts as a basic pla...
Step-by-step explanation:
• The importance of financial statements is mentioned below:
•
• 1
• Provides Information: Financial statements provide information to various
• accounting users both internal as well as external users
Stay updated with our latest educational content and study tips
Parent-Teacher Meetings (PTMs) are more than quick updates on marks — they’re a chance to build a real partnership between home and school. A good Parent-Teacher Meeting conversation helps parents see beyond grades. It opens up insights about a child’s strengths, struggles, emotions and even hidden talents. When parents participate actively, they don’t just track […]
Read More
In today’s world of endless information , knowing how to think is more important than knowing what to think . From school projects to real – life decisions , critical thinking helps students question ideas , analyze facts and form logical conclusions . But what exactly does critical thinking mean ? Simply put , it’s […]
Read More
Every student dreams of better grades , stronger focus and more study time – but the real challenge isn’t starting, it’s staying consistent . Building productive study habits is not about studying all day , it’s about studying smart . In today’s fast – paced digital world, distractions are everywhere – from endless phone notifications […]
Read More
Online gaming has rapidly become one of the most popular pastimes among children. Whether it’s multiplayer mobile games , PC adventures or console challenges , kids are spending more time than ever in the virtual world . On the surface, gaming seems entertaining and even educational – improving hand- eye coordination , teamwork and problem […]
Read More
Student Discussion
Be the first to comment.
ADD NEW COMMENT