Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 20

What is meant by transparency in financial statements? Why is it important for financial statements to be transparent? That is, who benefits from it and how do transparent statements influence the judgments of those receiving such statements?

Step 1 of 2

Financial statement:

The financial statement is the statement of the company position at a particular time period.

Every company prepares four types of financial statement:

1. Income statement (Profit and loss statement)

2. Statements of owner’s equity

3. Balance Sheet

4. Cash flow statement.

Income Statement:

The income statement is the statement of revenue and expenses which provide us information about net profit and a net loss of the organization.

Balance sheet:

Balance Sheet is the statement of assets and liabilities which provide information about the financial position of the company.

Statement of owners’ equity:

The statement of owners’ equity is the statement of the changes in the owners’ equity section in an accounting period.