What is Financial Statement?
Financial Statements are statements that serve as a means of communication between the organization and different users of financial statements regarding the financial position and profitability of the business at the end of a financial year. The financial statements of an organization also help them in different analyses, such as Credit Analysis, Debt Analysis, Security Analysis, and General Business Analysis. To ensure the reliability and accuracy of the financial statements, firms, accountants, government agencies, etc., audit the statements.
There are mainly 3 types of Financial Statements which are discussed below one by one:
Income Statement (P/L Statement): This Income Statement provides an overview of the company’s overall revenue generated, expenditures, and profit and loss over a certain time span. This also represents the company’s ability to actually generate revenue, manage the overall costs strategy, and also the profitability.
Balance Sheet: As we have discussed earlier balance sheet is the report of the financial position of the company at one point of time that contains information about company assets, liabilities, and the stakeholder’s equity distribution information.
Cash Flow Statement: The movement of cash & cash equivalents or inflow and outflow of cash is known as Cash Flow. Cash inflows are the transactions that result in an increase in cash & cash equivalents; whereas, cash outflows are the transactions that result in a reduction in cash & cash equivalents. Hence, a statement showing flows of cash & cash equivalent during a specified time period is known as a Cash Flow Statement. It also categorises the actual flow into different activities like operating, investing, & financing and provides insights into a company’s cash management and liquidity.
Difference between Balance Sheet and Financial Statement
Balance Sheet and Financial Statements play a major role in the financial reporting of any business in the most significant and important manner. This reporting enlightens the stakeholders with all the necessary and important information about the company’s financial stage and its current performance. The concept of the Balance Sheet and Financial Statement is discussed below with some main differences.
Table of Content
- What is Balance Sheet?
- What is Financial Statement?
- Difference between Balance Sheet and Financial Statement