A financial statement (or financial report) is a formal record of the financial actions and the position of a person, or business. It might be for work or to give to your banker when applying for a loan. Appropriate financial information is presented in an organized manner and in a form easy to understand.
Reports to verifyā
The financial statements are the formal records of the activities in the accounting department for any individual or organization. These reports are used to verify the following:
- Financial strength;
- Financial performance;
- Liquidity of the business.
Financial statements reveal the financial transactions and events for that individual or business.
Financial statements are something you need to learn about as sometime in your life you will probably need to prepare financial statements for your boss or for your family.
Four types of financial statements
Monetary position – this is likewise alluded to as the accounting report and exhibits the money related position at a specific date. It is made up of three elements:
- Assets – things that a person or business owns – cash, inventory, home, plant and machinery;
- Liabilities – things that business or person owes to someone or something like a bank or creditor;
- Equity –This is the amount of principal that is remaining after assets have been used to pay off any liabilities that are outstanding. It represents the amount when the liabilities or subtracted from the assets.
Statement of income
Statement of income is also referred to as the Statement of Profit & Loss, and reports the business or personal financial presentation such as net profit or loss over a definite period of time. The Statement of Income follows:
- Income – This is the business or person has earned during a period of time such as dividend income or sales revenue;
- Expense – The charges sustained by the business or person over a period such as car payment, rental charges and depreciation.
Net profit or net loss is reached by taking expenses from income.
- Statement of Cash Flow;
- Statement of Changes in Equity.
All of these statements need to be presented in a given form. This means that these statements need to be in the form of a Financial Statement Template. You can usually find these templates on any website that has templates for PowerPoint presentations.