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Major Financial Statements

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Overview of the Major Financial Statements

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Summary: Financial statements are created by companies to summarize financial activities and transactions. The three major financial statements created are the balance sheet, the income statement, and the statement of cash flows.

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Overview of Financial Statements

A financial statement is a document that summarizes all financial activities or transactions …show more content…

The executive management of a company uses financial statements to make business decisions. Shareholders use financial statements to determine whether to invest in a company. Banks use financial statements to determine whether to lend money to a company. The Securities and Exchange Commission of the US Government requires publicly traded companies to submit their financial statements. Lastly, employees may use financial statements to determine if they want to work for a company.

There are three major financial statements created by a company:

The Balance Sheet may also be called the Statement of Financial Position, and describes a company's financial position at a point in time. For example, many businesses have a fiscal year that ends on December 31. Therefore, the point in time for the balance sheet would be on December 31.

The Income Statement describes a company's revenues, expenses, and net income or loss over a period of time. The period of time is usually a year and the income statement would capture activities between January 1 and December 31.

The Statement of Cash Flows identifies the cash receipts (inflows) and cash payments (outflows) for a company over a period of

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