key term - Financial statements

Definition

Financial statements are formal records of the financial activities and position of a business, person, or other entity. They provide an overview of a company’s profitability, liquidity, and overall financial health through standardized reports.

5 Must Know Facts For Your Next Test

1. The four main financial statements are the Income Statement, Statement of Owner's Equity, Balance Sheet, and Statement of Cash Flows.
2. The Income Statement shows revenues and expenses over a specific period, resulting in net income or loss.
3. The Balance Sheet provides a snapshot of assets, liabilities, and owner's equity at a specific point in time.
4. The Statement of Owner's Equity explains changes in owner's equity from net income or loss and owner withdrawals.
5. The Statement of Cash Flows outlines cash inflows and outflows from operating, investing, and financing activities.

Review Questions

Related terms

IncomeStatement: A financial report that shows the company’s revenues and expenses over a specified period.

BalanceSheet: A statement that displays an entity’s assets, liabilities, and owner’s equity at a particular point in time.

AdjustedTrialBalance: A list of all accounts and their balances after adjusting entries have been made.