A Discussion on Four Different Types of Financial Statements and Balance Sheet

In every case, having financial statements come in handy for every single person whether they know it or not. Financial statements come in all shapes and sizes. Some are extremely long, and some might only consist simple in a matter of small numbers. Financial statements are documents that are used to inform the company, or business, of what decisions could possibly be made for the upcoming future. There are four different types of financial statements that I am going to be talking about: income statements, statements of owner’s equity, balance statements, and statements of cash flow.

To begin with, income statements are the easiest statements to work through. An income statement consist of a business’s revenues, expenses, and is finished with the net income. The income statements are used to help report the net income or net loss of the business for a specific period (Page 18). Another name for income statements is statements of earnings. This type of statement is used to find out the profitability for a particular period of the company (Page 23).

When making an income statement, be sure to have the information from the entire period of the time needed for the statements. For example, if making it for the year, be sure to say January 1, 2015-August 31, 2015. Another statement that uses this type of format would be the statements of the owner’s equity.

The statements of owner’s equity uses the same date format as the income statements. Companies and businesses are to make sure that they tell how long the period is for.

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This statement shows the changes in the owner’s capital over a period of time (Page 18). The owner’s equity statement list the business owner’s capital at the beginning of the time period, the owner’s contributions, the net income (which is taken from the income statement), how much the owner withdrew, and the final capital at the end of the time period. This type of statement helps owner’s understand about how much of their earnings were kept and reinvested within the company (Page 23).

The next type of statement that I mentioned is the balance sheets. Now just because it doesn’t say statements doesn’t mean it isn’t a statement. The balance sheet helps provide valuable information to financial statement users about economic resources the company has as well as debts the company owes. It helps allow decision makers to determine their opinion about the financial positions of the company. Some people might look at that and wonder what it means. Well, the balance sheets assist companies in keeping track of the assets, liabilities and the owner’s equity. One of the differences between this statement and the other two types of statements mentioned before is that this type of sheet is for individual dates.

The last statement that was mentioned above is the statement of cash flow. The cash flow is the easiest statement to remember, even if it isn’t the easiest to do. The cash flow statement incorporates the businesses cash receipts and cash payments for a specific period. This has the same dating as the balance sheets. While making this statement always remember to look over all of the payments and receipts help in the businesses files.

To conclude, income statements, statements of owner’s equity, balance sheets, and statements of cash flows are the four financial statements available to the world. In many cases you will see bankers, tax accountants, and business owners use every last one of these types of statements. For people who are not very good at making these statements it might be easiest to use the income statement or balance sheets. Always be sure to keep your accounts in businesses documented for any small or large transaction available.