Critically analyse financial statemebt Essay Example | Topics and Well Written Essays - 250 words

Critically analyse financial statemebt - Essay Example c. Cash Flow - cash flows provides the business’ operating, investing, and financing cash flows over a specified period. It reconciles the changes on the cash on hand at end of a period with the beginning balance by including the income derive from non-cash revenue and expenses â€Å"by adjusting net income for non-cash revenues and expenses† (Tempte, 2005). d. Statement of Changes in Owners’ Equity – the change in owner’s equity happens when a business profits, its asset value changes and when its owners adds more capital or made withdrawals against the business (McGrann, 1998). Sole trader or single proprietorship is a business owned solely by an entrepreneur where owner assumes all responsibilities pertaining to the business and do not distinguish between the owner and the business. In effect, he or she also carries the whole burden of the business’s liability. In the event that loss occurs, the liability will affect and extend to the owner’s finances. With regard to its income statement, a sole trader has to pay tax on the business net profit and in the event that the net profit is over a certain threshold, the owner has to pay the Value Added Tax (VAT) of 17.5%. This VAT rate however has been decreased to 15% in consideration of the recent financial crisis. With regard to reporting for taxation purposes, a complete income statement and balance sheet should be submitted to HMRC. The owner is responsible for keeping all the expenses for a certain tax year. The financial statement of a sole trader is straightforward where accounts are simpler compared to limited companies where entries vary due to the complexity of the business. It involves deduction of expenses from sales to arrive at the taxable net profit or loss (which of course not taxable anymore because it is a loss). Limited companies are also called as Joint stock companies or partnership where owners or