Paper Topic:

The Difference between Public and Private Financial Statements

The Difference between Public and Private Financial Statements

Financial statements refer to the formal records of the financial activities of a company . These statements give an overview of both the long term and short term financial conditions of a business . Financial statements are of four types namely balance sheets , income statements statement of retained earnings and statement of cash flows

For big corporations , financial statements are usually complex and may have management analysis and discussions as well as notes to these statements , which are regarded as integral to the statements (Alexander

and Britton , 2001

Financial statements are aimed at providing information about performance , the current financial position as well as any change in financial position of a company over a given period , hence assisting the users to make economic decisions . These statements must be comparable reliable , relevant and understandable for them to serve their purpose effectively . These statements are very useful to the company 's owners managers , employees , government agencies , banks and potential investors (Alexander and Britton , 2001

The rules followed in recording , measuring and presenting public financial statements differ from those used in business as well as non-profit making organizations . Two main financial reporting methods are used , and include either or a combination of cash accounting or accrual accounting . The chart accounts also differ greatly from those used in profit-oriented enterprises

The cash financial reporting method is one that considers only the cash flow of any financial events . In this method , revenues are only recognised when the company receives...

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