A joint stock company is required to prepare and publish financial statements annually . The financial statement shows the financial affairs of the company. The financial statements include statement of income, statement of retained earnings and balance sheet.
* Statement of income : It is a summarized statement of revenues earned and expenses incurred by the company for a specific period of time. It reports the results of business operations in terms of net profit or loss.
* Statement of retained earnings : This statement is also called profit and loss appropriation account. It presents the summary of changes that have occured in retained earnings over the specific period generally a year.
* Balance sheet: It is a summary statement of assets , liabilities and the owners' equity of the company. It gives the snapshot view of its financial position at the end of the specific period.
There is yet another important type of financial statements that a joint stock company has to prepare and is called the statement of changes in the financial position. The statement in changes in the financial position is a summarized statement of changes or movement of financial resources in the firm for the period covered by the firm's income statements. It shows the movement or flow of financial resources in and out of the firm during the period of two balance sheet dates. It shows the sources and uses of financial resources. The statement of changes in financial position can be prepared on cash, net working capital or all financial resources basis. The statement of changes in financial position prepared on net working capital basis is popularly called funds flow statement. This statement presents the sources and application of net working capital during a specific period of time.
Funds Flow Statement
Funds Flow Statement
The funds flow statement is the statement of change or movement of funds of the firm for the specific period of time. Funds flow statement shows the sources and application of fund during the period. The funds flow statement is a statement which is prepared to show and analyze the change, movement or flow of funds of the firm during a period of two balance sheet periods. It lists the sources of funds and its uses in the firm during the period.