The financial statement basically reflects the financial character of a business organization. It shows the profit level for both the long and the short term.
Types of Financial Statements
There are four types of financial statements each of which can be detailed as follows:
- Statement of Cash Flows: The cash flow activities are recorded in this type of financial statement. Cash flow is recorded in different activities like operating, financing and investing.
- Income Statement: The income statement is alternatively known as the Profit or Loss Statement. It records all the financial changes that occurred due to operating the company over a certain time period.
- Balance Sheet: The balance sheet keeps a record of the financial position of a company that includes its assets, liabilities and the net equity.
- Statement of Retained Earnings: This type of financial statement records the changes , if any, of retained earnings over a period of time.
Uses of Financial Statements
The financial statements that are prepared for large organisations are very complicated. It contains an extensive set analysis of the financial data.
It also contains notes to the financial statements. The notes are used to understand each and every item of the balance sheet.
It also provides a detailed analysis of the income and cash flow statements.