An income statement shows the results of operating
for a period of time. It is sometimes called
operating statement or statement of operations. It
shows how well an organization performed during the
period covered. Read
goods sold represents the sum of the costs of
all goods which have been sold during the
accounting period. It is ascertained by adding
the value of unsold goods at the beginning of
the year (opening inventory or stock) to the
purchases made during the year and the deducting
the values of unsold goods at the end of the
year (closing inventory of stock) from the
purchases. Theses are expired costs, and thus
are actual expenses for the year.
goods manufactured is the total cost of goods
completed during the period. Manufacturing
companies transform raw material into finished
goods through the use of labor and factory
facilities. For example, a company manufacturing
furniture from wood or timber.
Balance sheet shows the financial
position or condition of an organization at a
particular point in time. In fact, it is
sometimes referred to as a position statement or
statement of condition.
income statement and trading and profit and loss
account are prepared to ascertain the net result
of the business concerns. Some business concerns
who have adopted British Accounting System,
prepare trading and profit and loss account to
determine the net result of the business, while
some others who have adopted American Accounting
System, prepare income statement for the same
Majority of the
business enterprises are preparing their financial
statements in statement form. On this page effect of
adjustment on income statement is discussed to meet
the requirements of modern business.
Financial statements are evaluated for the use of
external parties as well as internal management.
External parties include government agencies,
creditors, shareholders and general public etc.