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Financial Statements: Definition and Meaning
Definition
Financial statements are formal reports that summarize a company’s financial position, operating results, cash flows, and changes in equity.
Why It Matters
Financial statements are used by owners, management, lenders, investors, sureties, tax advisors, and other stakeholders to evaluate a company’s condition and performance. The main statements commonly include the balance sheet, income statement, statement of cash flows, and statement of changes in equity or retained earnings.
Their usefulness depends on timely bookkeeping, sound accounting processes, accurate supporting schedules, and appropriate review.
Example
A year-end financial-statement package may include a balance sheet, income statement, cash flow statement, notes, and supporting schedules.
Related Terms
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