Main finanical statments - Essay Example

cash inflows over a certain time duration is the main purpose of the cash flow forecast. The cash includes deposits repayable on demand as well the cash in hand. For our purposes, the overdraft and the drafts will be balanced at with the banks. A cash flow refers to not only an increase but also a decrease in a business. Profit and Loss account statement: The major purpose of the profit and loss account statement is to bring into light whether the business has made profit or loss in their dealings.

The statement reflects the net profit after tax by minimizing the business expenses as well as taxation from the overall operating profit. The profit and loss account statement proves vital for the business because it provides clear figures with regards to what is impacting the business profit and what benefits the business. The profit and loss account is made by the business every 6 months or 1 year. By considering the sales that the company makes it can alter their sales by increasing them or so that they can generate constructive profit for the company and cover all their expenses.

The chief advantage that the profit and loss account can bring to the company is that through this account they can improve their business operation. If in the account they observe that the expenses of the company are high and much more than the sales, they can minimize these expenses to bring benefits to the company. Through this, the net profit will increase since the business will not be paying a lot of money. The Cash flow statement gives an idea to the company regarding from where the money is coming and where the money is being utilized.

On the statement the receipts are written in the first column while all the cash flows are written down under the receipts. These statements can be made by the companies for 6 months or for 1 year. Following the writing down of the cash receipts, the payments are also written. So from the receipts, the payments can