INTRODUCTION A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity.

For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. METHODOLOGY The data for the study has been collected from various secondary sources like books and journals. OBJECTIVES The main objectives of the study are: To find out the meaning of financial statement. To find out the procedure of preparing a financial statement.

FINDINGS Preparing the Financial Statements Once the adjusting entries have been made or entered into a worksheet, the financial statements can be prepared using information from the ledger accounts. Because some of the financial statements use data from the other statements, the following is a logical order for their preparation:

Income statement Statement of retained earnings Balance sheet Cash flow statement

Income Statement The income statement reports revenues, expenses, and the resulting net income. It is prepared by transferring the following ledger account balances, taking into account any adjusting entries that have been or will be made:

Revenue Expenses Capital gains or losses

Statement of Retained Earnings The retained earnings statement shows the retained earnings at the beginning and end of the accounting period. It is prepared using the following information:

Beginning retained earnings, obtained from the previous statement of retained earnings.

Net income, obtained from the income statement Dividends paid during the accounting period

Balance Sheet The balance sheet reports the assets, liabilities, and shareholder equity of the company. It is constructed using the following information:

Balances of all asset accounts such cash, accounts receivable, etc. Balances of all liability accounts such as accounts payable, notes, etc. Capital stock balance Retained earnings, obtained from the statement of retained earnings

Cash Flow Statement The cash flow statement explains the reasons for changes in the cash balance, showing sources and uses of cash in the operating, financing, and investing activities of the firm. Because the cash flow statement is a cash-basis report, it cannot be derived directly from the ledger account balances of an accrual accounting system. Rather, it is derived by converting the accrual information to a cash-basis using one of the following two methods:

Direct method: cash flow information is derived by directly subtracting cash disbursements from cash receipts.

Indirect method: cash flow information is derived by adding or subtracting non-cash items from net income.

Conclusion At regular period public companies must prepare the financial statements. Financial statements show the financial performance of an company. They are used for both internal-, and external purposes. When they are used internally, the management and sometimes the employees use it for their own information. Managers use it to plan ahead and set goals for upcoming periods. When they use the financial statements that were published, the management can compare them with their internally used financial statements. They can also use their own and other enterprises financial statements for comparison with macroeconomical datas and forecasts, as well as to the market and industry in which they operate in.