What is a Financial Statement

A financial statement is an official record of all the financial activities of the company. This statement is required for showing the financial position of a company to its various investors and consumers as well as emphasize on the performance and progress made. Thus, these statements are very beneficial for making comparisons and ascertaining which company can be relied upon. The financial statement keeps track of the assets, liabilities, revenue, income, expenses, equity and anything that deals with the financial position of the company.

The financial statement can also be used for different purposes. The important decisions as per the operations and financial management of the company can be taken by assessing this statement. This acts as a report to the company’s stockholders and investors as well and at the same time, also attracts potential investors to the company. The financial statement is also necessary for the company while applying for grants in financial institutions. Thus, this type of statement must contain all the necessary details related to the finances of the company and it should be formatted in a presentable and organized manner. This document can be created by a professional hired by the company as well.

  • The official name of the company for which this statement is being made must be clearly stated.
  • The statement must provide accurate details that deal with the assets, expenses, revenues, liabilities, equity and income. This will be used for future reference and must be recorded carefully.
  • The current financial position of the company must be highlighted and a comparison could be made from previous financial statements.
  • Taxes and other duties incurred by the company should be mentioned in the statement. This is especially required for tax authorities.
  • Lastly, the statement must use simple and lucid language for all to understand.

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