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    Definition - What Are Financial Statements?

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    Manuel Bautista
    Financial statements represent a formal record of a company's financial activities and include four main statements: the statement of financial position, income statement, cash flow statement, and statement of changes in equity. The statement of financial position presents a company's assets, liabilities, and equity at a point in time. The income statement reports a company's net profit or loss over a period of time by comparing income to expenses. The cash flow statement presents the movement of cash in and out through operating, investing, and financing activities. The statement of changes in equity details the movement in a company's equity from sources like net income, share issuances, dividends, and accounting policy changes.

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    Definition - What Are Financial Statements?

    Uploaded by

    Manuel Bautista
    167 views2 pages
    Financial statements represent a formal record of a company's financial activities and include four main statements: the statement of financial position, income statement, cash flow statement, and statement of changes in equity. The statement of financial position presents a company's assets, liabilities, and equity at a point in time. The income statement reports a company's net profit or loss over a period of time by comparing income to expenses. The cash flow statement presents the movement of cash in and out through operating, investing, and financing activities. The statement of changes in equity details the movement in a company's equity from sources like net income, share issuances, dividends, and accounting policy changes.

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    Financial statement

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    Financial Statements

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    Financial statements represent a formal record of a company's financial activities and include four main statements: the statement of financial position, income statement, cash flow statement, and statement of changes in equity. The statement of financial position presents a company's assets, liabilities, and equity at a point in time. The income statement reports a company's net profit or loss over a period of time by comparing income to expenses. The cash flow statement presents the movement of cash in and out through operating, investing, and financing activities. The statement of changes in equity details the movement in a company's equity from sources like net income, share issuances, dividends, and accounting policy changes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    167 views2 pages

    Definition - What Are Financial Statements?

    Uploaded by

    Manuel Bautista
    Financial statements represent a formal record of a company's financial activities and include four main statements: the statement of financial position, income statement, cash flow statement, and statement of changes in equity. The statement of financial position presents a company's assets, liabilities, and equity at a point in time. The income statement reports a company's net profit or loss over a period of time by comparing income to expenses. The cash flow statement presents the movement of cash in and out through operating, investing, and financing activities. The statement of changes in equity details the movement in a company's equity from sources like net income, share issuances, dividends, and accounting policy changes.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Definition - What are Financial

    Statements?
    Financial Statements represent a formal record of the financial activities of an entity. These are written
    reports that quantify the financial strength, performance and liquidity of a company. Financial Statements
    reflect the financial effects of business transactions and events on the entity.

    Four Types of Financial Statements


    The four main types of financial statements are:
    1. Statement of Financial Position
    Statement of Financial Position, also known as the Balance Sheet, presents the financial position
    of an entity at a given date. It is comprised of the following three elements:
    Assets: Something a business owns or controls (e.g. cash, inventory, plant and machinery, etc)
    Liabilities: Something a business owes to someone (e.g. creditors, bank loans, etc)
    Equity: What the business owes to its owners. This represents the amount of capital that remains
    in the business after its assets are used to pay off its outstanding liabilities. Equity therefore
    represents the difference between the assets and liabilities.
    View detailed explanation and Example of Statement of Financial Position
    2. Income Statement

    Income Statement, also known as the Profit and Loss Statement, reports the company's financial
    performance in terms of net profit or loss over a specified period. Income Statement is composed
    of the following two elements:
    Income: What the business has earned over a period (e.g. sales revenue, dividend income, etc)
    Expense: The cost incurred by the business over a period (e.g. salaries and wages, depreciation,
    rental charges, etc)
    Net profit or loss is arrived by deducting expenses from income.

    View detailed explanation and Example of Income Statement


    3. Cash Flow Statement
    Cash Flow Statement, presents the movement in cash and bank balances over a period. The
    movement in cash flows is classified into the following segments:
    Operating Activities: Represents the cash flow from primary activities of a business.
    Investing Activities: Represents cash flow from the purchase and sale of assets other than
    inventories (e.g. purchase of a factory plant)
    Financing Activities: Represents cash flow generated or spent on raising and repaying share
    capital and debt together with the payments of interest and dividends.
    View detailed explanation and Example of Cash Flow Statement
    4. Statement of Changes in Equity

    Statement of Changes in Equity, also known as the Statement of Retained Earnings, details the
    movement in owners' equity over a period. The movement in owners' equity is derived from the
    following components:
    Net Profit or loss during the period as reported in the income statement
    Share capital issued or repaid during the period
    Dividend payments
    Gains or losses recognized directly in equity (e.g. revaluation surpluses)
    Effects of a change in accounting policy or correction of accounting error
    View detailed explanation and Example of Statement of Changes in Equity

    Link between Financial Statements

    The following diagram summarizes the link between financial statements.

    - See more at:


    http://accounting-simplified.com/financial/statements/types.html#sthash.VBj5yg2Z.dpuf

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