Historical financial statements
In business, a financial statement is an organized document that has financial information, like income and transactions, of a person, company, government, or organization. They are used by these people and organizations to make decisions on the subject (the person or organization who the financial statement is about), like whether or not to invest in a company and at what price.
Contents
- Basic financial statements
- Statement of Financial Position (Balance Sheet)
- Statement of Profit or Loss (Income Statement / Profit or Loss Account)
- Statement of Changes in Equity
- Statement of Cash Flows
- See also
Basic financial statements
A financial statement can be written in many forms, but in most countries there are four (4) basic financial statements that are standard. They are:
Statement of Financial Position (Balance Sheet)
A Statement of Financial Position (Balance Sheet) is a financial statement that includes everything the business owns (called assets) and the business owes (called liabilities, which also include debts) as at a particular date. The amount the business owes to its owner is called equity (also represents the amount of investment of the owner into the business).
For a private individual (a person not in business), an asset may be their house or car, and their liability may be their mortgage and credit cards.
The Statement of Financial Position is a snapshot of the financial health of a business at specific dates.
Statement of Profit or Loss (Income Statement / Profit or Loss Account)
A Statement of Profit or Loss (or Income Statement) shows the profit or loss made during the year by taking into consideration the revenues generated during the year (whether payment is received or not) less any costs incurred during the year (whether such costs have been settled or not).
Statement of Changes in Equity
A statement of owner's equity shows the movement of the owner's investment in the business. In the case of a company, this separates the investment amount from the amounts included in Capital and Revenue Reserves.
Statement of Cash Flows
A Statement of Cash Flows is a financial statement that shows the transactions involving cash during the year categorized by Operating, Investing and Financing Activities, thus explaining the movement in Cash and Cash Equivalents during the year.
See also
In Spanish: Estados financieros para niños
FAQs
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand.
What are the 5 basic financial statements explain briefly? ›
They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. Balance sheets show what a company owns and what it owes at a fixed point in time. Income statements show how much money a company made and spent over a period of time.
What 3 basic facts are contained in the income statement? ›
The income statement presents revenue, expenses, and net income. The components of the income statement include: revenue; cost of sales; sales, general, and administrative expenses; other operating expenses; non-operating income and expenses; gains and losses; non-recurring items; net income; and EPS.
What are three financial facts? ›
The balance sheet, income statement, and cash flow statement each offer unique details with information that is all interconnected. Together the three statements give a comprehensive portrayal of the company's operating activities.
What is financial statement in simple words? ›
Financial statements are a set of documents that show your company's financial status at a specific point in time. They include key data on what your company owns and owes and how much money it has made and spent.
What is the purpose of financial statements? ›
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable.
Why are financial statements important? ›
The purpose of financial statements is to allow businesses to understand their financial standing. This provides a summary of previous financial data which can help businesses to make informed decisions. This data can also inform other individuals or companies which may potentially have a state in the business.
What are the 4 important types of financial statement? ›
There are four primary types of financial statements:
- Balance sheets.
- Income statements.
- Cash flow statements.
- Statements of shareholders' equity.
The income statement, balance sheet, and statement of cash flows are required financial statements. These three statements are informative tools that traders can use to analyze a company's financial strength and provide a quick picture of a company's financial health and underlying value.
How to do a financial statement? ›
5 steps to prepare your financial statements
- Step 1: gather all relevant financial data. ...
- Step 2: categorize and organize the data. ...
- Step 3: draft preliminary financial statements. ...
- Step 4: review and reconcile all data. ...
- Step 5: finalize and report.
A statement of special educational needs sets out your child's needs and the help they should have. It is reviewed every year to make sure that any extra support given meets your child's needs.
What is a financial statement for school? ›
It will help you understand the total sales and expenses incurred throughout a term or a school year. Cash Flow Statement: Your school's cash flow statement shows your cash inflows and outflows, that is your school's expenses and sources of funding, e.g, school fees, lesson fees, etc.
How do you explain accounting to a kid? ›
Accounting is simply bookkeeping work to manage finances, keeping track of revenue, expenses, investments, trends, and goals. By tracking and analyzing, it's possible to plan for the future and set goals.
In Spanish: Estados financieros para niños
