Financial statements are written records that convey the business activities and the financial performance of a company. Government agencies, accountants, firms, etc., often audit these to ensure accuracy and for tax, financing, or investing purposes.
Financial statements include:
- Balance sheet
- Income statement
- Cash flow statement
Balance sheet
It shows the company’s assets, liabilities, and shareholder equity. One uses the balance sheet to evaluate a business, and it is one of the three core financial statements. In financial accounting, a balance sheet is a summary of the financial balances of an individual or organization.
Income statement
An income statement or profit and loss account is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. It shows you the company’s income and expenditures. The income statement also shows whether a company is making a profit or loss for a given period. Also, it indicates how the revenues are transformed into the net income or net profit.
Cash flow statement
It shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. It also includes all cash outflows that pay for business activities and investments during a given period.
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