Components of Financial Statements. What are the components of financial statements? Or,
Corporate financial statements are prepared in accordance with corporate laws, regulations, and IAS/IFRS. Briefly describe the components of corporate financial statements.
The components of financial statements are:
➢ Balance sheets (assets, liabilities, and owner’s equity)
➢ Income statements (financial performance)
➢ Cash flow statements (changes in balance sheet accounts and income affect cash and
cash equivalents)
➢ Statements of shareholders’ equity. (Changes in value to stockholders’ or shareholders’
equity, or ownership interest in a company)
➢ Accounting policy and explanatory notes
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This presents the financial position of the entity. The financial position means quantification of the assets, liabilities, and equity of the owners on a specific date.
An income statement is one of the three important financial statements used for reporting a company’s financial performance over a specific accounting period, with the other two key statements being the balance sheet and the statement of cash flows.
It indicates how the revenues (also known as the “top line”) are transformed into the net income or net profit (the result after all revenues and expenses have been accounted for). The purpose of the income statement is to show managers and investors whether the company made money (profit) or lost money (loss) during the period being reported.
An income statement represents a period of time (as does the cash flow statement). This contrasts with the balance sheet, which represents a single moment in time.
The Statement of Cash Flows (also referred to as the cash flow statement) is one of the three key financial statements that report the cash generated and spent during a specific period of time (e.g., a month, quarter, or year). The statement of cash flows acts as a bridge between the income statement and balance sheet by showing how money moved in and out of the business.
Statement of shareholders’ equity reports the changes in the value of shareholders’ equity or ownership interest in a company from the beginning of an accounting period to the end of it. It gives investors more transparency about the changes in equity accounts and reports the business activities that contribute to the movement in the value of shareholders’ equity.
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