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.
Basic financial statements[change | change source]
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:
Balance sheet[change | change source]
A balance sheet is a financial statement that includes everything the subject owns (called assets and equity) and owes (called liability or debt). For a person, an asset may be their house or car, and their liability may be their mortgage and credit cards. It is the statement prepared with a view to measure the financial position of a business on a certain date. Balancesheet is Snapshot of financial health of a company at that moment. It contains assets, liabiliy and capital or owner's equity.
Income statement[change | change source]
An income statement is a financial statement that includes the subject's income, expenses and profit. This is also known as a profit and loss account.
Owner's equity[change | change source]
A statement of owner's equity is a financial statement that includes what part of the subject belongs to the owner, such as the amount of a company that belongs to the investor.
Cash flows[change | change source]
A statement of cash flow is a financial statement that includes the sources and uses of the subject's cash.