What is a financial statement?

A financial statement is a report that shows the financial information of a business. There are four main types of financial statement:

  1. Balance sheet: a snapshot of your business’ financial condition at a single point in time, such as 12/31/2016. Shows your business assets, liabilities and owner's’ equity at that time.
  2. Profit and loss statement: also called an income statement. Shows your business’ revenues, costs and expenses over a period of time, such as 1/1/2016 to 12/31/2016.
  3. Cash flow statement: also called a statement of cash flows. Shows changes to the cash coming into and going out of your business over a period of time. Only records cash (not all income). Shows whether you can cover short term expenses like bills and payroll.
  4. Statement of changes in equity: also called a statement of retained earnings. Shows changes in the equity of your business for a set time period. In other words, changes in how much money your business keeps (rather than pays out to shareholders).

Combined, these statements provide a good view of the financial health of your business.

 

Related terms:
What is a profit and loss statement?
What is the objective of financial reporting?
What is cash flow management?

Related Xero feature:
Keep track of your numbers with financial reporting

Related Small Business Guide:
Why use financial management software?

Accounting Terms

Accounting terms and how-tos for beginners. Let us walk you through all the basics that you need know.

What is a financial statement?

A financial statement is a report that shows the financial information of a business. There are four main types of financial statement:

  1. Balance sheet: a snapshot of your business’ financial condition at a single point in time, such as 12/31/2016. Shows your business assets, liabilities and owner's’ equity at that time.
  2. Profit and loss statement: also called an income statement. Shows your business’ revenues, costs and expenses over a period of time, such as 1/1/2016 to 12/31/2016.
  3. Cash flow statement: also called a statement of cash flows. Shows changes to the cash coming into and going out of your business over a period of time. Only records cash (not all income). Shows whether you can cover short term expenses like bills and payroll.
  4. Statement of changes in equity: also called a statement of retained earnings. Shows changes in the equity of your business for a set time period. In other words, changes in how much money your business keeps (rather than pays out to shareholders).

Combined, these statements provide a good view of the financial health of your business.

 

Related terms:
What is a profit and loss statement?
What is the objective of financial reporting?
What is cash flow management?

Related Xero feature:
Keep track of your numbers with financial reporting

Related Small Business Guide:
Why use financial management software?

Showing 36 more questions for all topics