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# Financial Statements and Their Usefulness for Decision-Making Financial statements are formal records prepared by an organisation to present its financial performance, financial position, and cash movements during a particular accounting period. They are prepared from accounting records and provide useful financial information to owners, managers, investors, creditors, employees, government authorities, and other interested parties. In management accounting, financial statements are important because they provide the basic financial data required for analysing business performance and making effective managerial decisions. The main financial statements are the Trading and Profit and Loss Account, Balance Sheet, Cash Flow Statement, and Statement of Changes in Equity. The Trading Account is generally prepared by trading concerns to determine gross profit or gross loss. It compares sales with the cost of goods sold. Gross profit indicates the basic profitability of the business before considering operating expenses. The Profit and Loss Account shows the net profit or net loss after taking into account operating expenses, non-operating incomes, interest, depreciation, and other relevant items. The Balance Sheet, also known as the Statement of Financial Position, shows the financial position of a business on a particular date. It presents assets, liabilities, and owners' equity. Assets represent resources controlled by the organisation, such as cash, inventory, machinery, buildings, receivables, and investments. Liabilities represent obligations payable to outsiders, such as loans, _____ ________ ______ __________ ______ _________ _____.
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