Application of Financial Statement

Application of Financial Statement Essay example
Masters
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Finance & Accounting
Pages 9 (2259 words)
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Introduction This paper focuses on the practical aspects of financial statements. It is written in three parts. The first part examines the components of the income statement and how it can be applied to everyday life in a business. The second part discusses the benefits that a business manager can get if s/he understands the income statement…

Introduction

The Income Statement The income statement is “a financial statement listing all revenue and expenses for a fiscal period leading to net income or net loss: a statement that describes the operations of a business over a period of time (fiscal period)” (Kravitz, 1999 p63). The income statement is therefore a financial statement that shows the results of the operations of a business. This involves financial information about the income that a business makes and the expenditure that the business incurs over a given period of time. In effect, the income statement matches the revenue of a business with its expenses and provides the net income or net loss. In other words, the income statement provides an insight into the kind of revenue inflows and outflows that were incurred during the normal trading activity of the business. Another aspect of the income statement is that it is a period statement. In other words, it captures the financial picture of a business's trading activities over a defined period of time. This means that the income statement is mainly concerned with how a business performed in trade over the specified period of time. ...
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