Everything You Ever Wanted To Know About Financial Statements

By Author: Chrish George
Total Articles: 1
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Financial statements are documented history or records that show the financial status and performance of a firm. These statements are audited by accountants, firms, government agencies, etc. to secure reliability and for other purposes such as financing, tax and investigation purposes.

This report reflects the performance, financial condition and liquidity of a firm. There are the income statement, balance sheet, statement of cash flow, and statement of owner’s equity in a financial statement. In this article, we will discuss all four types of statements.
Four Major Forms Of Financial Statements
Financial analysts and investors use these statements to get an overview of the firm’s performance and to predict the future steps of the organisation’s stock price. All the major types of financial statements are described below.
●    Income Statement
An income statement is a document that states the firm’s financial performance through net profit and loss within a specific duration. This part of the financial statement is also called a profit and loss statement. Income statement contains ...
... two major components, i) income and ii) expenses.
●    Balance Sheet
The balance sheet is also known as the statement of financial position. This report shows the financial statement of an organisation at a specific or given date. There are three elements in the balance sheet, i) Assets, ii) Equity and iii) Liabilities.
●    Cash Flow Statement
This statement shows the flow in bank balances and cash over a specific time duration. There are three segments under which the cash flow is divided.

Investigating activities - It reflects the cash flow through the buy and sale of assets such as factor plant. These assets do not include inventories.
Operating activities - Operating activities reflect the cash flow from the company’s primary activities.
Financing activities - It reflects cash flow raised or spent on repaying or generating debt and share capital with the payments of dividends and interest.

●    Statement Of Owner’s Equity Or Changes In Equity
This statement deals with the movement of equity of the owner over some time. Another name for the statement of owner’s equity is Statement Of Retained Earnings. The flow or changes in owner’s equity is obtained from the following elements.

Total profit or loss within the reported period according to the income statement.
Payment of dividend
Share capital repaid or issued during a specific period
Profit and losses identified directly in the equity

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