Case of a Company

This case will explain how financial reporting affect the business decision making of a company.
Financial reporting provide: 1. the necessary information for enterprise managers in daily operations and management; 2. usful information for investors and lenders to make decision; 3. information of funds and enterprise solvency for creditors; 4. management and supervision of enterprises of the information for the financial, commercial, taxation and other administrative departments; 5. the necessary information for internal auditors, external audit inspection, supervision of production and business activities.
Profit and loss account based on the matching concept, it reports income and expenses within a certain period. Matching concept is the accounting principle that requires the recognition of all costs that are directly associated with the realization of the revenue reported within the income statement. Profit and loss account balance also reportes the difference if income over expenses, the difference is called net profit or net income, if the costs exceed the income, the difference is called net loss.
Retained earnings statement is a process which reflects economic entities changed the amount of retained net income as net income and its distribution has changed in a certain accounting period. In the company, investemt by shareholders could increase shares capital, and pay dividends to the shareholders will reduce retained earnings, while net income or net loss for each accounting period, are reflected in the increase or decrease of retained earnings. The data of retained earnings and current dividends of, can’t be found from the working papers but in the retained earnings account records.
Balance sheet is an itemized statement that lists the total assets and the total liabilities of a given business to portray its net worth at a given moment of time. The amounts shown on a balance sheet are generally the historic cost of items and not their current...