- 21-Jul-2022

Financial statements for trading concern normally comprise **balance sheets, statements of retained earnings, cash flows and income statements**.

Financial Statements Have No **Predictive Value**

The information in a set of financial statements provides information about either historical results or the financial status of a business as of a specific date. The statements do not necessarily provide any value in predicting what will happen in the future.

**How to Ensure the Accuracy of Financial Statement?**

- Tip 1 – Hiring an External Auditor.
- Tip 2 – Adoption of Adequate Internal Controls.
- Tip 3 – Accurate Data Entry.
- Tip 4 – Reconciliation of Internal and External Records.
- Tip 5 – Look Out for Balance-Sheet and Income Statement Errors.

Oftentimes, **the certified public accountant (CPA)** who performs your general accounting and/or bookkeeping and prepares your annual tax return can also prepare your financial statements and, in addition, perform the appropriate service in order to meet your bank's requirements.

Data entry errors

Some common data entry blunders include: **Entering items in the wrong account**. Transposing numbers. Leaving out or adding a digit or a decimal place.

What is Financial Accounting? Financial accounting is **a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time**.

**Here are seven, easy-to-spot things to look for when analyzing your financial statements.**

- Negative Cash on Your Balance Sheet.
- An Even Inventory Number — or No Inventory.
- Balance Sheet that Doesn't Balance.
- Negative Loan Balances.
- Negative Payroll Taxes Payable.
- No Rent, Utility Bill, etc.
- Inconsistent Gross Margins.

An error on the income statement **affects your company's shareholder's equity account**. Shareholder's equity, also called capital or net worth, is the amount left over after your company sells all of its assets and pays off all of its liabilities.

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- #1 – Historical Costs. Financial reports depend on historical costs.
- #2 – Inflation Adjustments.
- #3 – Personal Judgments.
- #4 – Specific Time Period Reporting.
- #5 – Intangible Assets.
- #6 – Comparability.
- #7 – Fraudulent Practices.
- #8 – No Discussion on Non-Financial Issues.

**Identifying the problem**

- Lack of income/job loss.
- Unexpected expenses.
- Too much debt.
- Need for financial independence.
- Overspending or lack of budget.
- Bad credit.
- Lack of savings.

Issuing reports on financial statements includes the examination of financial statements that are intended to present financial position (balance sheet and statement of retained earnings), results of operations (income statement), and statement of cash flows in conformity with generally accepted accounting principles

Financial statements for trading concern normally comprise **balance sheets, statements of retained earnings, cash flows and income statements**.

**There are generally six steps to developing an effective analysis of financial statements.**

- Identify the industry economic characteristics.
- Identify company strategies.
- Assess the quality of the firm's financial statements.
- Analyze current profitability and risk.
- Prepare forecasted financial statements.
- Value the firm.

**How to Determine the Financial Health of a Company**

- Analyze the Balance Sheet. The balance sheet is a statement that shows a company's financial position at a specific point in time.
- Analyze the Income Statement.
- Analyze the Cash Flow Statement.
- Financial Ratio Analysis.

The **four** mathematical operations are addition, subtraction, multiplication and division.

Arithmetic Operations with Functions. You are used to **adding, subtracting, multiplying, and dividing** real numbers—you do these operations every day in a variety of situations. You have also learned how to perform these four basic operations on algebraic expressions.

**Operations with Functions**

- Topics. Introduction and Summary. Addition and Subtraction of Functions. Problems. Multiplication and Composition of Functions. Problems. Inverse Functions. Problems. Other Methods of Finding Inverses. Problems.
- Terms.

**Operations of Functions**

- The sum of two functions, f and g: (f + g)(x) = f (x) + g(x).
- The difference of two functions f and g: (f - g)(x) = f (x) - g(x).
- The product of two functions f and g: (fg)(x) = f (x)×g(x).
- The quotient of two functions f and g: ( )(x) = . If g(x) = 0, the quotient is undefined.

In mathematics, an operation is **a function which takes zero or more input values (called operands) to a well-defined output value**. The number of operands (also known as arguments) is the arity of the operation.

The order of operations is a rule that tells the correct sequence of steps for evaluating a math expression. We can remember the order using PEMDAS: **Parentheses, Exponents, Multiplication and Division (from left to right), Addition and Subtraction (from left to right)**.

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- Symbolic or algebraic representation.
- Numerical (tables) representation.
- Graphical representation.
- Verbal representation.

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