20/03/2023
What is Financial Statement?
Financial statements are written reports created by a company’s management to summarize the business’s financial condition & position over a certain period (quarterly, half-yearly, or yearly). These statements, which comprise the balance sheet, income statement, cash flow statement, and statement of shareholders’ equity, must be prepared by specified and standardized accounting standards to ensure that reporting is consistent.
Balance Sheet
The balance sheet is a financial statement that provides a snapshot of the assets, liabilities, and shareholder’s equity. Many companies use the shareholders’ equity as a separate financial statement. But usually, it comes with the balance sheet.
Profit and Loss/ Income Statement
Profit and loss (P&L) statement summarizes the revenues, costs, and expenses incurred during a specified period. It is basically used to identify net profit or loss for a specific time period.
Company managers and investors use P&L statements to analyze the financial health of a company.
Cash Flow Statement
A Statement of Cash Flow is an accounting record that tracks the incoming and outgoing cash and cash equivalents from a business. It helps identify the availability of liquid funds with the organization in a particular accounting period. It deals with operating, investing and financing activities of a business.
Owner’s Equity/ Shareholder’s Equity/ Retained Earnings Statement
A shareholders’ equity refers to the portion of a company’s net worth that the shareholders are entitled to receive when it liquidates. It is calculated by subtracting total liabilities from the firms’ total assets. The result helps determine how stable a company and its financial health are.
