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Accounting communication through financial statements

Accounting communication through financial statements

Accounting communication through financial statements are a central feature of accounting. They are the primary means of communicating important accounting information to users. It is helpful to think of these statements as models of business enterprise, because they are attempts to show the business in financial terms. Four major statement are used to communicate the required information about business.

Balance Sheet:

Show the Accounting communication through financial statements position at either the beginning or the end of the accounting period i.e at a certain date.

Income statement

Reports on the activities or earnings of a business during the period i.e indicating the profitability of the business.

Statement of changes in owners equity:

Shows the cash receipts and cash payments of the business over the same period covered by the income statement.

Additionally, notes to financial statement are in integral part of financial statements. Of late, business concerns present another statement in the financial reports i.e value added statement.

Financial accounting vs. management accounting

The pivotal role of accounting is to provide information to the decision makers inside and outside of the organization. From the decision makers perspective accounting is divided into two major categories: Financial accounting and managerial accounting.

financial accounting is that part of accounting which is basically external decision maker oriented that is it provides information to the external users for decision making about the organization. On the other hand, managerial accounting is related with providing information to the internal decision makers who are involved to prepare financial statement. They are responsible for effective performance of the organization through providing these statements to the external users.

Accounting communication through financial statements

 

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