The Importance Of Four Major Financial Statements

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Business owners’ use at least four major financial statements to keep a grasps on their company 's finances during a specific time frame. Financial statements are usually completed monthly, quarterly, semiannually and annually. The major financial statements include the statement of cash flows, the statement of stockholder 's equity, the balance sheet, and the income statement. Each one provides a different awareness into a company 's financial status in the stated period.
An income statement summarizes all the resources, that have come into the firm from operating activities: money the firm used up; expenses it incurred in doing business; and resources it has left after paying all costs and expenses, including taxes (Shah, 2011). These tool …show more content…

One portion of the income statement is dedicated to the income and revenue for the period. The other portion of the statement reflects the expenses for the same period. The company’s profitability during that particular period, quarter or yearly, will determine the differences between the two numbers. If the company experienced a loss during that business cycle, then that would mean that the expense was higher than income. An income statement provides insight into a company’s sales and expense amounts, and how they affect liquidity. Most businesses typically prepare a monthly income statements to assess business …show more content…

The cash flow statement reports cash receipts and disbursements related to three major actives of a firm: operations, investments, and financing (Shah, 2011). This statement has been a mandatory part of a business 's financial reports since 1987, tracking the amounts of cash and cash equivalents entering and exiting a business (Beresford, 1988). The cash flow statement allows business owners and stockholders to understand how a company operate, by measuring the cash inflow and outflow. The cash flow statement is separate from the income statement and balance sheet because it does not contain the amount of future incoming and outgoing cash that has been documented as credit. Therefore, cash is not the same as net income, which, on the income statement and balance sheet, includes cash sales and sales made on

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