FAQs
Financial statements are documents that convey a company's business activities and financial performance. As the U.S. Securities and Exchange Commission (SEC) succinctly put it, “They show you where a company's money came from, where it went, and where it is now.”
What is 5 financial statements? ›
For-profit primary financial statements include the balance sheet, income statement, statement of cash flow, and statement of changes in equity. Nonprofit entities use a similar but different set of financial statements.
What are the 3 types of financial statements? ›
The income statement, balance sheet, and statement of cash flows are required financial statements. These three statements are informative tools that traders can use to analyze a company's financial strength and provide a quick picture of a company's financial health and underlying value.
What are all 4 financial statements? ›
The 4 types of financial statements
- Balance sheets.
- Income statements.
- Cash flow statements.
- Statements of shareholders' equity.
What are the top 3 financial statements? ›
The balance sheet, income statement, and cash flow statement each offer unique details with information that is all interconnected. Together the three statements give a comprehensive portrayal of the company's operating activities.
What are the 4 most common financial statements? ›
There are four basic types of financial statements used to do this: income statements, balance sheets, statements of cash flow, and statements of owner equity.
What counts as a financial statement? ›
Financial statements refer to written records presented in a structured manner to convey the company's financial activities and performance. These reports show the company's source of revenue, assets and liabilities, how it spends money and cash flow management.
Are there 3 or 4 financial statements? ›
There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. Balance sheets show what a company owns and what it owes at a fixed point in time.
Which is the most important financial statement? ›
The income statement will be the most important if you want to evaluate a business's performance or ascertain your tax liability. The income statement (Profit and loss account) measures and reports how much profit a business has generated over time.
What are the golden rules of accounting? ›
The three golden rules of accounting are (1) debit all expenses and losses, credit all incomes and gains, (2) debit the receiver, credit the giver, and (3) debit what comes in, credit what goes out. These rules are the basis of double-entry accounting, first attributed to Luca Pacioli.
Generally accepted accounting principles, or GAAP, are standards that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.
What is the difference between financial statements and financial reporting? ›
Financial reporting and financial statements are often used interchangeably. But in accounting, there are some differences between financial reporting and financial statements. Reporting is used to provide information for decision making. Statements are the products of financial reporting and are more formal.
How do financial statements flow together? ›
Net income from the bottom of the income statement links to the balance sheet and cash flow statement. On the balance sheet, it feeds into retained earnings and on the cash flow statement, it is the starting point for the cash from operations section.
What are the two most common financial statements? ›
A set of financial statements includes two essential statements: The balance sheet and the income statement
- The balance sheet (sometimes also known as a statement of financial position)
- The income statement (which may include the statement of retained earnings or it may be included as a separate statement)
What are the 5 types of financial statements with examples? ›
3. 5 Types of Financial Statements
- 3.1. Balance Sheet. The first type of financial report is the balance sheet. ...
- 3.2. Income Statement. The second type of financial report is the income statement. ...
- 3.3. Cash Flow Statement. ...
- 3.4. Statement of Changes in Capital. ...
- 3.5. Notes to Financial Statements.
What are two other names for the income statement? ›
There are many different names for an income statement, including a profit and loss statement, P&L, statement of earnings, or statement of operations.
What are the 5 steps of financial reporting? ›
Defining the accounting cycle with steps: (1) Financial transactions, (2) Journal entries, (3) Posting to the Ledger, (4) Trial Balance Period, and (5) Reporting Period with Financial Reporting and Auditing.
What is accounting standard 5 in short? ›
The objective of AS 5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies, is to prescribe the classification and disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis.
What is a financial statement and five example of fixed assets? ›
Fixed assets are tangible, long-lived assets used by a company in its operations, such as machinery, factories, tools, furniture and computers. They are listed in the noncurrent asset section on a company's balance sheet because their useful lives extend beyond one year.
What is the purpose of financial statements? ›
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable.