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Accounts : Financial Statements of Company : Lecture 1 Video Lecture - B Com

FAQs on Accounts : Financial Statements of Company : Lecture 1 Video Lecture - B Com

1. What are financial statements of a company?

Ans. Financial statements of a company are formal records that provide an overview of the financial activities and position of the company. These statements include the balance sheet, income statement, cash flow statement, and statement of changes in equity. They are important tools for evaluating the financial performance and health of a company.

2. Why are financial statements important for a company?

Ans. Financial statements are important for a company because they provide essential information about the company's financial performance, profitability, liquidity, and solvency. They help stakeholders, such as investors, creditors, and management, in making informed decisions. Financial statements also enable the comparison of a company's performance with its industry peers and historical trends.

3. What is the purpose of a balance sheet?

Ans. The purpose of a balance sheet is to present a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and shareholders' equity. The balance sheet helps in assessing the company's liquidity, solvency, and overall financial health. It is used by investors, creditors, and analysts to evaluate a company's ability to meet its financial obligations.

4. What does an income statement show?

Ans. An income statement, also known as a profit and loss statement, shows a company's revenues, expenses, and net income or loss over a specific period. It provides information about the company's financial performance and profitability. The income statement helps in assessing the company's ability to generate profits and its operating efficiency. It is used by investors, creditors, and analysts to evaluate the company's profitability and growth potential.

5. How does a cash flow statement differ from other financial statements?

Ans. A cash flow statement focuses on the cash flows of a company, showing the inflows and outflows of cash during a specific period. It provides information about the cash generated from operating activities, investing activities, and financing activities. Unlike the balance sheet and income statement, which are prepared on an accrual basis, the cash flow statement is prepared on a cash basis. It helps in assessing the company's liquidity and cash flow management.

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Oct 17, 2025 Last updated

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