You decide ( should be relevant financial accounting class ) Research Paper

You decide ( should be relevant financial accounting class ) - Research Paper Example Financial statements are, therefore, the financial results that are presented in the form of reports to represent the financial condition of the organization (AccountingTools 1). Financial statements are useful in various ways. These statements are very useful in the course of determining the ability of a business as far as raising cash and cash equivalents, is concerned. It also concerns the various uses and the sources of such cash. The statements are also very useful in determining whether a business can pay back its debts (Philip 2). The information of this nature can be of much importance to the creditors to find out whether the business can pay back the money they would like to lend to it. The statements also assist the organization to be able to track financial trends and use the trends to spot any profitability issues. From the financial statements, financial ratios can also be derived to help in showing the indications about the condition of the business. Financial statements are also critical in investigating certain transactions that are carried out in the business. This paper is, therefore, aimed at investigating the types of financial statements that are commonly used, their purposes and components. There are various types of financial statements that exist. However, the commonly used financial statements are three and include a balance sheet, income statement and statement of cash flow. Financial statements need to be formatted in accordance with the major accounting frameworks when the statements are intended to be supplied to the external users such as lenders and investors. This will make it easy for the external persons to be able to understand the statements without any personalized guidance. The frameworks give a leeway on how the financial statements can be structured. To this effect, statements issued by different firms in the same industry have some particular differences in appearance. Such guidelines are not