Financial statements are reports that provide a snapshot of a company’s financial position at a particular point in time.
We will cover all the different types of financial statements in detail. Let’s start without further delay.
Different types of financial statement
There are several different types of financial statements, including the balance sheet, income statement, statement of cash flows, and statement of shareholder equity.
The balance sheet is a financial statement that shows a company’s assets, liabilities, and equity at a specific point in time. Assets are resources that a company owns and expects to use in the future to generate income, such as cash, investments, and property. Liabilities are obligations that a company owes to others, such as loans and accounts payable. Equity represents the residual interest in the assets of a company after liabilities are settled. The balance sheet is used to assess a company’s financial position and solvency, as well as to understand the sources and uses of its funds.
The income statement is a financial statement that shows a company’s revenues and expenses over a specific period of time, such as a month or a year. The income statement is used to assess a company’s profitability and financial performance. It shows the company’s revenue, which is the income generated from the sale of goods or services, as well as the expenses incurred in the process of generating that income, such as cost of goods sold, marketing and advertising costs, and salaries and wages. The difference between a company’s revenues and expenses is its net income, which is also known as its profit or loss.
Cash flows statement
The statement of cash flows is a financial statement that shows a company’s inflows and outflows of cash over a specific period of time. It is used to understand a company’s liquidity and financial flexibility. The statement of cash flows is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Operating activities refer to the company’s day-to-day operations, such as selling goods and services, collecting accounts receivable, and paying bills. Investing activities refer to the company’s acquisition and disposal of long-term assets, such as property, plant, and equipment. Financing activities refer to the company’s raising and repayment of capital, such as issuing and repurchasing shares of stock or borrowing and repaying loans.
Statement of shareholder
The statement of shareholder equity is a financial statement that shows the changes in a company’s equity over a specific period of time. It includes the company’s net income or loss, as well as any changes in the company’s capital structure, such as the issuance or repurchase of shares of stock. The statement of shareholder equity is used to understand a company’s financial position and the sources and uses of its funds.
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