Financial statements are also called financial reports. Business, persons, and other entities record their financial activities under formal records. It demonstrates the financial performance or strength of a company. The authenticity is very often examined by accountants, firms, or government agencies.

Financial statements involve three major aspects. These are the balance sheet, income statement, and cash flow statement. It also includes the statement of equity that tracks the changes in equity.

The balance sheet allows an at-a-glance view of the individual’s or company’s assets, stakeholder’s equity, and liabilities. What your organization possesses and what it owes as well as the amount invested by its owners is reflected in it.

Income statements, on the other hand, focuses attention on a specific period of time and it includes annual financial statements and quarterly financial statements. Revenues, expenses, net income, and earnings make their way into the income statements.

Organizations pay back their debts by generating cash. The cash flow statement calculates the efficacy of the organization’s revenue generation that covers its operating expenses and fund investments. In short, it is complementary to the income statement and the balance sheet. The CFS indicates whether the company is standing on a strong foundation.

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