FINANCIAL STATEMENT

INTRODUCTION
The development of the times has resulted in companies being more
aggressive in making efforts to develop companies into the era of globalization.
The development of the company is determined, one of which is the accuracy of
the financial statements presented by each company. Therefore we need to
understand how the financial statements that will be compiled and reported by
each company.
Company financial statements are a means of communication between internal
parties (management) and external parties of the company that provide an
overview of management's performance in managing resources owned in a
certain period of time.
Financial statements aim to provide useful financial information for users in
making economic decisions. The financial statements must meet the objectives,
rules, and principles of accounting in accordance with generally accepted
standards so that financial statements can be accounted for and useful for each
user.
In the process of preparing financial statements there are accounting principles
that underlie the measurement of assets, liabilities, equity, income, expenses,
profits, and losses.
These accounting principles include:
 accrual accounting,
 historical costs and reasonable assessments,
 Materiality
 and conservatism.
DEFINISI FINANCIAL STATEMENTS
Financial statements are a summary of a recording process sourced from
financial transactions that occurred during the current year or year.
Among these accounting principles, conservatism is an important principle
so that it can be called the accounting principle that most dominantly affects the
preparation of financial statements.
The use of accounting conservatism is based on the assumption that the
company experiences uncertainty in the recognition of an event in two economic
conditions faced by the company's management.
In this case, the uncertainty in question is uncertainty regarding
income/profits and costs/losses that may occur in the future. Such uncertainty
can be acknowledged and expressed using sound considerations.
In the Basic Framework for the Preparation and Presentation of Financial
Statements, it is explained that when the condition of uncertainty requires
healthy consideration that contains an element of prudence when making
estimates so that assets or income are not overvalued and liabilities or expenses
are not assessed too much.
The Statement of Accounting Standards also states that management can
select and apply accounting policies. If there is a transaction/event that has not
been regulated in the PSAK, management must establish a policy to ensure that
the financial statements present relevant and reliable information.
Conservatism plays an important role in financial statements because it is
conservatism that most influences accounting judgment. The principle of
conservatism can intuitively be useful in predicting future conditions that convey
information about the company's future capabilities worse than in the current
period.
Prudent financial reporting will provide confidence and benefits that are
not misleading to its users even if economic and business activities are
surrounded by uncertainty.
 From the point of view of management or the compiler of financial
statements, accounting conservatism is defined as the selection of generally
accepted accounting policies by which report assets with the lowest value and
liabilities with the highest value.
Accounting conservatism adheres to the principle of slowing down revenue
recognition and accelerating cost recognition. The implications of conservatism on
financial statements are to recognize costs or losses that are likely to occur but
not to recognize in advance future income or profits even though there is a high
probability where costs or losses are one of the unfavorable consequences in
uncertainty so that the recognition of losses before they occur can be justified.
Accounting conservatism causes an understatement of profits in the
present period that can lead to an overstatement of profits in the next period, as
a result of an understatement of costs in that period.
Conservatism in accounting practice is influenced by several factors, including:
 the degree of financial difficulty.
 Corporate debt as well as
 litigation risk.

Financial difficulties faced by a company as a company's financial condition

that is in trouble due to the inability of management to overcome the company's
economic problems.
This illustrates the poor quality of performance, which encourages
shareholders to make manager changes. These pressures and threats can
encourage managers to be careful in preparing financial statements that are used
as a measure of manager performance. However, this can cause profit reporting
that is used as a measure of managers' performance to be less informative so that
problematic financial conditions can encourage managers to regulate the level of
accounting conservatism.
Thus, increasingly high financial difficulties prompted managers to raise the
level of accounting conservatism. Corporate debt describes the source of funds
obtained from outside the company. The debt owned by the company is a
reference considered by creditors in terms of the ability to fulfill their obligations
until maturity so that it can influence the decision to provide further credit.
Companies that have relatively high debts trigger creditors to know and supervise
the company's operations and accounting.
Company managers will have difficulty hiding information from creditors so
managers will be careful in regulating the level of conservatism to avoid violations
of debt agreements. Thus, the company's increasingly high debt encourages
managers' performance to lower the level of accounting conservatism.
Litigation risk can be interpreted as the risk inherent in a company due to
lawsuits by creditors and shareholders when the company is facing the worst. The
existence of various applicable regulations and law enforcement that cover
accounting practices that require managers to pay more attention to accounting
practices to avoid threats to legal provisions. As well as civil lawsuits faced by
companies, they can potentially cause losses if the company commits a violation
of the accounting in question. Where, the company's management made a
mistake in expressing excessive statements regarding profits and net assets.
Therefore, managers seek to avoid lawsuits by disclosing the worst news
immediately so that managers will be cautious in applying accounting and
preparing financial statements that tend to be conservative. Thus companies with
a higher risk of litigation are pushing managers up the level of accounting
conservatism. This financial statement is presented by the Manager which will be
used as the basis for the assessment of the company's work and can also be used
for external parties.

COMPONENTS OF FINANCIAL STATEMENTS

The components of financial statements consist of 5 types, namely:
1. Income Statement
2. Capital Change (Retained Earning Statement)
3. Balance sheet statement
4. Laporan Arus Kas (Cash Flow of statement)
5. Financial of Notes