A balance sheet is split into two portions and ensures both sides are equal, with this main formula:
In other words, the company’s assets, or the means to operate the business, are balanced by the business’s financial obligations and equity investment brought into the business and its retained earnings.
2. Statement of Comprehensive Income (SCI)
This is also known as Profit & Loss statements. They reflect the company’s revenue for the year based on
After all amount has been consolidated, profit or loss is determined by the formula:
3. Statement of Cash Flows (SCF)
This report shows the detailed information on how and where the cash of a business is being used. There can be different types of cash flow used to run the daily operation depending on the nature of the business.
Financial statements act as a communication data as it is shared throughout the whole business and are being reviewed to provide financial decisions and analysis by the accounting department for the business.
These documents will then be summarised into the financial statement and presented to the business owners to aid the upper management to make important decisions for the business and control assets.