Uses of Financial Statements

A number of advantages accrue to the users of financial statements when they study accounting information contained in them. The uses are explained under the following heading:

1. Uses of Balance Sheet

It has been stated that the balance sheet shows the financial condition of a business enterprise. The financial condition is represented by a listening of the kinds and amounts of assets, together with the corresponding total of liabilities and capital.

2. Uses of Income Statement

Income statements helps in the calculation of the amount of net income which one can spend and still be as well off as before. It is the amount that the owner(s) can take out of the business and still leave the capital intact.

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