FAQs: About Financial Statements
What Is a Financial
Statement?
Sometimes also called a
financial report, a financial statement is an official
commentary on the financial position of an organization
or individual over a defined period of time. It is a
standard document prepared in a logical form and using
simple language intended to inform both those inside and
outside of an organization about the financial dealings
of the organization.
Financial statements are
usually prepared either quarterly or annually and
consist of three basic parts, namely, an income
statement, a balance sheet, and a cash flow statement.
What Is an Income
Statement?
An income statement, also
called a profit and loss statement, consists of:
- Total income
- Total costs incurred
through sales and other activities
- Total Income minus total
costs = profit (or loss)
What Is a Balance Sheet?
A balance sheet is a
financial statement, prepared at any given time, of an
organization’s assets and any claims on those assets,
which are referred to as liabilities. It will also
include a statement about shareholder value, if
appropriate.
What Is a Cash Flow
Statement?
A cash flow statement details
the financial records of receipts and expenditures
incurred for an organization during a specific, defined
period. The statement will also show any net cash
increase or decrease over that period
In addition, financial statements are likely to need explanatory notes to enable the data to be fully understood by all interested parties. The notes will also act as an aid to the necessary analysis of the implications of the statements to the organization.
Financial statements are a big part of what
your financial professional will do