Financial statements A financial statement is a profile of some aspect of an

Financial statements a financial statement is a

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Financial statements A financial statement is a profile of some aspect of an organisation’s financial circumstances. The three most basic financial statements, which should be prepared and used by all organisations, are the balance sheet, income statement and cashflow statement. A balance sheet lists the assets and liabilities of the organisation at a specific point in time, usually the last day of the organisation’s financial year. The balance sheet can be seen as a snapshot of the organisation’s financial position at a single point in time. The income statement summarises financial performance over a period of time, usually one year. An organisation’s revenues, less expenses, are reported to give the net income (profit or loss) for a certain period. The cashflow statement presents the cash receipts and payments for the stated time period. Financial ratios Information from an organisation’s balance sheet and income statement is used in computing financial ratios . Financial ratios compare different elements of a balance sheet or income statement with one another to assess the financial health, position and performance of the organisation. Liquidity ratios indicate how easily organisational assets can be converted into cash. Debt ratios measure the organisation’s ability to meet long- term financial obligations. budget a plan expressed in numerical terms financial statement profile of some aspect of an organisation’s financial circumstances financial ratios compare different elements of a balance sheet or income statement with another to assess the financial health, position and performance of the organisation Copyright © 2014. Juta and Company. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 5/12/2018 12:56 PM via UNISA
509 CONTEMPORARY MANAGEMENT PRINCIPLES CHAPTER 21 Principles of control Financial audits Financial audits are independent appraisals of an organisation’s accounting, financial and operational systems. There are two major types of financial audit, namely the external and the internal audit. External audits are financial appraisals conducted by experts who are not employees of the organisation. External audits are typically concerned with determining that the organisation’s accounting procedures and financial statements are compiled in an objective and verifiable manner. An internal audit is handled by employees of the organisation. Its objective is the same as that of an external audit – to verify the accuracy of financial and accounting procedures used by the organisation. Furthermore, internal audits examine the efficiency and appropriateness of financial and accounting procedures.

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