Basics Understanding and Preparation of Financial Statements

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Understanding Financial Statements

For those interested in the position and financial condition, in dire need of financial information can be obtained from financial statements. The information is compiled and presented in the form of the company balance sheet, income statement, statement of changes in capital and cash flows. Such information is needed by those who go public in preparation for a public offering for one of the requirements that companies go public is to submit its financial statements for the last two years have been checked by a certified public accountant.

Each company has financial statement that aims to provide information concerning the financial position, performance and changes in financial position of an enterprise that benefits a large number of users of financial statements in making economic decisions. The financial statements should be prepared periodically to interested parties. Understanding financial statements according to Baridwan (1992: 17) the financial statements are a summary of the process of recording financial transactions that occurred during the two year concerned. According Sundjaja and Barlian (2001: 47) financial report is a report describing the results of the accounting process that is used as a means of communication to the parties concerned with the financial data or corporate activity.

While the definition of financial statements according to Munawir (1991: 2) financial statements is essentially the result of the accounting process that can be used as a tool for communicating financial data or activities of a company.

Financial statements can be concluded is the main accounting statements that communicate financial information to the parties concerned, as material considerations in economic decision making.

Basic Financial Statements

Company financial statements based on accounting rules and should provide historical information, which is a set of basic quantitative essential input used in calculating economic values.

The financial statements consist of:

A. The income statement is a report on income, expenses, profit and loss derived by an enterprise during a certain period.

2. Balance is a report on the assets, liabilities and capital of the company at any given moment.

a. Assets, divided into two, namely:

- Long term, ie a period of more than 1 year

- Short term, the period of 1 year or less than 1 year.

b. Debt can be classified into:

- Guaranteed full, the creditor is given a guarantee equal to or greater than the amount of debt.

- Secured in part, creditors are given the guarantee is less than the amount of debt

- Unsecured creditors, creditors are not given a guarantee in the form of certain goods.

3. Retained earnings statement which lists the cumulative earnings from previous years and current year are not distributed as dividends.

4. Cash flow statement showing the company's operating, investing and financing cash flow.