Financial statements are financial reports of an organization, company or a institute that are released monthly, quarterly, half-yearly or annually. These statements tell about the economic status of the companies in details and reveal the data on a number of economic factors like revenues and taxes. It is legal obligation to release official financial statement. A company or an individual can be penalized for not releasing financial statement on time, especially in cases where the public funds are invested and mobilized.
There are, from a general point of view, a total of four fundamental financial statement varieties that are mentioned below –
- Balance sheet – It mainly lays down the details of current assets and the liabilities of a company. It also talks about the ownership equity of the organization.
- Income statement – The other name for this is ‘Profit and Loss’ statement. It contains a concise format revealing data about the company’s profits and earnings and losses, if any. The revenues from the sale of services and/or goods are talked about.
- Retained earnings statement – As the name suggests, this type of financial statement as the records of the retained earnings of the company, highlighted in an organized manner.
- Cash flow statement – The financial statement in this case tells about the cash flow details of the business related transactions. The operating income data is mentioned in this case.
The financial statements have definite purposes and without them the proper functioning of numerous business activities is not possible. Few of those purposes are –
- The investors judge these statements and speculate its growth and accordingly moderate their decisions.
- The administrative authorities oversee these in order to check the health of the business houses.
- The business decisions and several commercial perspectives depend on the release of the financial statements and the data it contains.