The aim of financial accounting statement is to provide a picture of financial position

and performance ( Mclaney & Atrill 1995). There are five main components in
financial statement. The first is statement of financial position which is also known as
balance sheet. It could be seen that the form shows the wealth status of a business, in
addition, assets, liabilities and owners equity are counterbalancing sections in the
statement. The second part of financial statement is statement of financial
performance which is also known as profit and loss account or income statement. As
for the main purpose of income statement, businesses could realize the profit and
generated over a period and it could be shown as revenue and expenses. Another
important component is cash flow statement, which demonstrate the cash outflow and
inflow in a period. Cash flow statement is one of the most useful financial statement
how a company manage its flow of fund (Mckinnon & Hertenstein 1997). At last,
there are also other significant elements in financial statement, including notes and
statement of changes in equity which assist users to understand changes in share
capital and reserve. It seems that all of these information present the state of operation
of corporation.

When it comes to the preparation of financial statement, Cassar (2009) states that
How frequently a firm prepares financial statements determines the minimum
interval for which the firm can internally evaluate or voluntarily furnish the operating
performance and financial position of the firm to owners or creditors (2009:28). It
refers to the importance of financial statement the preparation of financial statement is
conducive to understand the situation for a company. Furthermore, the process of
financial statement is supposed to be more prudent and accurate. As for large
companies, they produce the financial statement with application of the International
Financial Reporting Standards (IFRS) by non-US firms and application of Generally
Accepted Accounting Principles (Barth et al. 2012). For processing in large
companies, there are three important forms would be produced, balance sheet, income
statement and cash flow, after that, additional statement must be provided by those

companies according to IFRS ( Mclaney & Atrill 1995). In processing of balance

sheet, it is importance to keep balance which imply the asset equals to the liability
plus equity. In regard of income statement, recording the revenue and expense in time.
In addition, a company could considerate a better method for calculating cash flow.
For example, indirect method is good access. In concluding the main objective of
financial statement is provide a document to see the maintenance of capital.

Reference
Atrill, P. and Mclaney, E. (2013) Accounting and Finance for non-specialists. 8th edn.
London: Pearson.

Cassar, G. (2009) Financial Statement and Projection Preparation in Start-up

Ventures, The Accounting Review, 84(1), pp.27-51.

Barth, M. E., Landsman, W. R., Lang, M. and Williams, C. (2012) Are IFRS-based
and US GAAP-based accounting amounts comparable?, Journal of Accounting and
Economics, 54(1), pp.68-93.

Hertenstein, J. H. And Mckinnon, S. M. (1997) Solving the puzzle of the cash flow
statement, Business Horizons, 40(1), pp.69-76.