Financial Statements: List of Types and How to Read Them

It functions as a supplement, providing clarity to those who require it without having the information placed in the body of the statement. Nevertheless, the information included in the footnotes is often important, and it may reveal underlying issues with a company’s financial health. The cash flow statement reconciles the income statement with the balance sheet in three major business activities. Generally Accepted Accounting Principles (GAAP) are the set of rules by which United States companies must prepare their financial statements. It is the guidelines that explain how to record transactions, when to recognize revenue, and when expenses must be recognized. International companies may use a similar but different set of rules called International Financial Reporting Standards (IFRS).

• Often, the footnotes will be used to explain how a particular value was assessed on a specific line item.
• ______ is prepared to ascertain the financial result of a business operation over a given period of time and ______ shows the financial position of a business at a particular date.
• Your balance sheet is a big indicator of your company’s current and future financial health.
• A purchase or sale of an asset, loans made to vendors or received from customers, or any payments related to a merger or acquisition is included in this category.
• For example, descriptions of upcoming new product releases may be included, as well as issues about a potential product recall.

Footnotes may provide additional information used to clarify various points. This can include further details about items used as a reference, clarification of any applicable policies, a variety of required disclosures, or adjustments made to certain figures. An income statement can also be called a statement of earnings or a profit and loss (P&L).

Financial statements are usually prepared at the _______ of financial year.

Below is a portion of ExxonMobil Corporation’s cash flow statement for fiscal year 2021, reported as of Dec. 31, 2021. We can see the three areas of the cash flow statement and their results. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business, to learn more about the different types of financial statements for your business. Or, you can add your retained earnings statement to your balance sheet.

The cash flow statement (CFS) measures how well a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments. The cash flow statement complements the balance sheet and income statement. In addition, U.S. government agencies use a different set of financial reporting rules.

Financial Accounting

Your balance sheet is a big indicator of your company’s current and future financial health. You can also use your balance sheet to help you make guided financial decisions. Financial statements are also read by comparing the results to competitors or other industry participants.

For example, footnotes will explain how a company calculated its earnings per share (EPS), how it counted diluted shares, and how it counted shares outstanding. The balance sheet can also be called the statement of financial position. The interactive activity below contains the last row of our spreadsheet (the “Balance” row with the totals for each category). See if you can figure out where the various column totals go in the income statement. For example, some investors might want stock repurchases while other investors might prefer to see that money invested in long-term assets.

Expenses

Expenses that are linked to secondary activities include interest paid on loans or debt. Use the formula above to help calculate your retained earnings balance at the end of each period. Is prepared at a particular date usually the end of the financial year, while the ………. Footnotes may also include information regarding future activities that are anticipated to have a notable impact on the business or its activities. Often, these will refer to large-scale events, both positive and negative.

The second statement, the statement of owner’s equity, summarizes the increases and decreases in the owner’s equity. According to our cash-basis income statement above, the business lost $12,500. We also know that the owner put in $20,000 at the beginning of the month and took out $4,000 at the end of the month. The operating activities on the CFS include any sources and uses of cash from running the business and selling its products or services. Cash from operations includes any changes made in cash accounts receivable, depreciation, inventory, and accounts payable. These transactions also include wages, income tax payments, interest payments, rent, and cash receipts from the sale of a product or service.

Financial statements are typically prepared in the

Your cash flow statement, or statement of cash flows, is all of your business’s incoming and outgoing cash. Basically, your cash flow statement shows you how much cash flows in and out of your business. Your statement financial statements are typically prepared in the following order of cash flows only records the actual cash your company has. Since this whole analysis was based on cash transactions, our statement of cash flows won’t be any different than our income statement above.