TYPES OF FINANCIAL STATEMENT

Types of financial statement



Types of financial statement

Introduction

Companies represent their financial information in different types of statement. The purpose of financial statement is to keep a formal record of companies' financial activities. These financial statements are in form of written reports evaluating financial performance, strength and liquidity of the business. Therefore, financial statements give the financial effect of the business event and transaction on the organization (Brigham et al., 2010).

Discussion

There are four types of financial statements and it is noticeable that these different financial statements represent different types of activities that are occurring in particular business. Four types of financial statements are as follows:

Balance Sheet

Income Statement

Statement of Cash Flows

Statement of Retained Earnings

Balance Sheet

The balance sheet represents the financial status of the business at particular time. Balance sheet is somehow different from other financial statements as other finance statements consider a period of time to represent the financial position of the firm, and balance sheet represent the financial health of the business at particular instance of time rather than a period.

Balance sheet consists of three components; assets - this is the component which business controls or owns such as plant, machines, stock, cash etc.; liabilities - these are part of business but is not owned by the business but owes to someone else such as loans by financial institutions and creditors etc.; equity - it is the element of the business which is owned by the business owner and business owes this and it is the part of the business which is left when assets are used to pay off its liabilities and hence it is the difference between assets and liabilities.

Balance sheet is also known as statement of financial position (Ehrhardt & Brigham, 2011).

Income statement

Income statement which also known as Profit and ...