Financial statements

In business, a financial statement is an organized document that includes financial information, like income and transactions, of a person, company, government, or organization. They are used by these people and organizations to make decisions on the subject (the person or organization who the financial statement is about), like to invest in a company.

Basic financial statements

A financial statement can be written in many forms, but in most countries there are four (4) basic financial statements which are standard. They are:

Balance sheet

A balance sheet is a financial statement that includes everything the subject owns (called assets and equity) and owes (called liability or debt). For a person, an asset may be their house or car, and their liability may be their mortgage and credit cards.

Income statement

An income statement is a financial statement that includes the subject's income, expenses and profit.

Owner's equity

A statement of owner's equity is a financial statement that includes what part of the subject belongs to the owner, such as the amount of a company that belongs to the investor.

Cash flows

A statement of cash flows is a financial statement that includes the sources and uses of the subject's cash.