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Financial statements are summaries of the operating, financing, and investment activities of a firm. According to the Financial Accounting Standards Board (FASB), the financial statements of a firm should provide sufficient information that is useful to
investors and creditors in making their investment and credit decisions in an informed way.
a firms strengths and weaknesses so that management can take advantage of a firms strengths and make plans to counter weaknesses of the firm.
The strengths must be understood if they are to be used to proper advantage and weaknesses must be recognized if corrective action needs to be taken
Purpose of F/S
F/S are a structured representation of the financial position and of the transactions undertaken by an entity that is useful to a wide range of users in making and evaluating decisions about the allocation of resources. Specifically, the objectives of F/S in the public sector are to provide information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it. F/S can also have a predictive/prospective role, providing information useful in predicting the level of resources required for continued operations and the resources that may be generated by them.
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Prudence
Current assets:
Cash & securities Receivables Inventories
Fixed assets:
Tangible assets Intangible assets