5 Main Types Of Financial Statements To Measure Performance

There are actually several different types of financial statements within accounting. Unfortunately, unless you are a professional CPA, you may not yet be aware of this. These five types of financial statements are the most common used by business owners like you to help them gain an idea of their performance, financial position and cash flow situation. Keep reading to find out what they are.

Income Statement

Income statements are the fundamental type of financial statements. These reports provide information on the financial health and performance of a specific organization for the report period. The statement of income report always includes sales, expenses and net profit or net loss, depending on company’s performance. An earnings per share report will sometimes also be included in these income statements if the business is publicly held. This is the most important financial statement to complete for every single report period.

Balance Sheet

A balance sheet, also known as a Statement of Financial Position, is a report that provides insight into an entity’s financial position at any given time. These financial reports include three data sets: assets, liabilities and equity. This is something you will find frequent use for in business, particularly if you are looking for investors or trying to get a business loan. You may even use it to identify just how badly your company was impacted by your Christmas downturn. Make sure you keep balance sheets in mind when you are identifying the right financial report for any specific use.

Cash Flow Statement

Cash flow statements are another vital set of finance reports. A cash flow statement report is sort of a combination of a balance sheet and an income statement. These statements serve to reconcile income statements with balance sheets, particularly in the areas of business operations, investment activities and financing activities. For a business owner, these reports are imperative to identifying cash flow problems. If you need to fix cash flow management at your company and avoid costly start up business loans, consider using cash flow statements to help you rectify any issues.

Statement Of Owner’s Equity

Statements of Owner’s Equity are not the type of financial report that you will use frequently. However, it is still one you should keep in mind for those moments you do need it, unless you use online accountants services. This can be used when there are changes to owner’s equity between accounting periods. These financial statements include three key components: beginning equity balance, the amount added or subtracted and the ending balance. If you ever find your equity changes in the future, remember to create a Statement of Owner’s Equity.

Statement Of Retained Earnings

Statements of Retained Earnings similarly report changes. However, these particular financial reports identify the changes in retained earnings within a specified period. You will typically find them used by publicly traded companies to improve investor confidence in their organization. So, you may not ever find a need for them yourself. But, it is still good to be aware of them, just in case. A Statement of Retained Earnings report will include information about the amount of earnings being retained, net income and dividends. If you ever plan to go public with your business, keep this in mind.

Above are the most common types of financial reports used in business. If you are a business owner, it is good to know about all the different types of financial statements and reports you will need to use at various points throughout the life of your business. This will help you to take control of your business financial health to identify problem areas and fix issues before they get out of hand. Be sure to refer back to this post if you ever need a little reminder.

Photo from https://www.thoughtco.com/the-three-types-of-financial-statements-192716

Ad



Leave a Reply

Your email address will not be published. Required fields are marked *

*

Scroll To Top