FINANCIAL MANAGING A senior partner in your company suggests that you prepare a

Question

FINANCIAL MANAGING
A senior partner in your company suggests that you prepare a detailed discussion paper for new and existing businesses addressing the topics below.
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(LO 4.1) Discuss the structure and purpose of the main financial statements . Describe the main differences between, Income statement, Balance Sheet and Cash Flow Statement). Provide examples of the statements in your answer. Target 2 typed pages.
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(LO 4.2) Compare different formats of financial statements for various types of businesses (sole trader, partnership and limited company). Provide examples of financial statements for each type of business.
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Guidelines to achieve Merit (M) and Distinction (D) grades:
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M2 -- The discussion should indicate that learners have used a range of sources of information. Include the references in the body of the discussion (I.e. in the assignment itself) as well as in the bibliography.
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D2 “ Learner's evidence should show that they have used an independent approach and worked individually to produce the discussion paper.

Explanation / Answer

4.1- Main purpose of Financial Statements- Financial statements are made for knowing the liquidity, solvency, financial and profitability position of the company.

Difference between Income statement, Balance Sheet and Cash Flow Statement-

4.2- Compare different formats of financial statements for various types of businesses-

Income Statement Balance Sheet Cash Flow Statement Income and expenditures are shown for the accounting period Assets and Liabilities are shown for a particular period Inflow and Cash flow are shown for a financial year Tells profitability postion of the company Tells solvency and liquidity position Tells adequate cash position.

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