Balance sheets and profit and loss statements: analyzed and defined for business executives

The two basic reports which the chief executives of any business enterprise should receive currently are: 1. The Balance Sheet, and 2. The Statement of Profit and Loss. The Balance Sheet represents the financial condition of a business at a given date, and the Statement of Profit and Loss explains the change in net worth resulting from the industrial or business operations during a given period. The Balance Sheet and the Statement of Profit and Loss are prepared not only for those who operate the business, but also for those who own it. These statements are useful from at least three viewpoints, in each of which the executives should be interested: 1. Efficiency of Operations and Management. 2. Credit Risk. 3. Investment Standpoint

Classification and definitions of ledger accounts

The classification of ledger accounts appearing on the following pages is not intended to fit the accounts of any one particular firm, or, in fact, of any one industry. It is at best only a broad treatment of representative accounts used in manufacturing industries. Likewise, the definitions are not intended to apply specifically to accounts found in any one ledger, but are intended to point out the particular group in which any account would fall. In using this classification, it should be remembered that the individual accounts will have to be set up according to the needs of each different business. With the foregoing in mind, it is hoped that this treatment of ledger accounts will meet the general interest of those who are anxious to standardize this phase of accounting practice