Introduction

From Raising Capital to Reporting Performance

Having seen how a company raises capital through shares and debentures, the next step is to understand how it reports back to its stakeholders: through its financial statements.

Financial statements are the end product of the entire accounting process. They are prepared by consistently applying accounting policies, the accounting standards prescribed under the Companies Act, and the broader accounting concepts, principles, and legal environment within which the company operates. Because they summarise a company's transactions for a period, financial statements become the primary source of information from which conclusions are drawn about a company's profitability and financial position.

For this information to actually be useful, financial statements must be arranged in a proper, standardised form — so that shareholders and other users can understand them easily and use them meaningfully in their own economic decisions.