Four Common Financial Company Reports

In the end of every period accountants prepare financial company reports, which include information that was organized and recorded throughout the accounting cycle. Four common financial statements are income statements, statements of capital, balance sheets and cash-flow statements. Combined together these reports provide powerful information for the company’s owners and investors. Even though they are all related, this article will discuss each financial statement separately.

Income statement

An income statement classifies results from business operations during a given period and lists various revenues and expenses. The company’s net income or net loss is represented by the difference between those revenues and expenses. Revenue means the income from the production, sales or delivery of the goods and services. Expenses refer to outflows incurred to make revenue. This type of financial company reports shows how much the business earned or lost over a year, a quarter or a month. It also demonstrates earnings per share, which indicates how much money shareholders would receive in case of the distribution of all net earnings for the period.

Statement of capital

Capital accounts stand for how much of the company you own, and the statement of capital shows changes in these capital accounts. In the end of the period any net income belongs to the owner. Then you can reinvest it in the business, withdraw all of it or use some of the profit as personal income. These financial company reports are usually prepared after the income statements, as accountants need the information on whether the company has a net income or net loss.

Balance sheet

Balance sheet is based on fundamental accounting principle: assets = liabilities + equity. It indicates everything the company possesses (assets), all its debts to creditors (liabilities) and the owner’s capital (equity) at a specific point in time. This type of financial company reports can be used when it is necessary to evaluate the company’s ability to meet its long-term obligations. There are two kinds of assets, current assets and fixed ones. Current assets are presented by the assets that can be easily converted into cash, while fixed assets include land, buildings and equipment. Liabilities also subdivide into two categories of short-term (current) and long-term (non-current) liabilities, which depends on their repayment terms.

Cash-flow statement

Although the company may be profitable, it can still experience deficit in cash. The cash-flow statement serves to evaluate the company’s ability to pay its bills during the accounting cycle. These financial company reports demonstrate all sources and uses of the company’s money, and whether the firm’s cash flow is increasing or decreasing. The sources and uses are broken into the categories of operating, investing and financing activities. The needed information for this statement is taken from the beginning and ending balance sheets and from the income statement.

The preparation of financial company reports is essential for all types of companies because it helps to avoid unnecessary risks and understand the financial situation better. It is much easier to plan ahead and set goals for upcoming periods if the business has proper financial statements available.