Business financial statements reveal the financial status of a business or a company. It shows the credibility of a company.
Business financial statements, provide information regarding the different activities pertaining to business. Activities may be operational, financial, it may include investments and associated business events. However, the financial statements or reports that are prepared take into account, not only the current statistics of the business but also scrutinize the company’s performance history.
Business financial statements are not only needed in banking operations (for availing loans), it also helps a business owner to review the different areas of business, which require improvement. Business financial statements are needed for individuals seeking loans of any kind from any financial institution, other than banks. It is also needed for carrying out various transactions in business, making important financial decisions with regard to business.
Information Provided by Business Financial Statements:
Typically, business financial statements provide information on the following:
Cost of insurance
Income statement, the loss and profit statement in particular
It also includes other related information pertaining to the company.
The business financial statements are worked out according to the norms laid down by the GAAP or Generally Accepted Accounting Principles. The financial statements are usually prepared by CPAs or the Certified Public Accountants.
Role of the Balance Sheet in Business Financial Statements:
The balance sheet provides information on assets, equities and liabilities of the company. Information on current liabilities, current assets, long term liabilities and long term assets are also provided.
The Profit and Loss report gives a comparative account of profits and losses in different quarters in the present year and the last few years.
There are various methods by, which a cash flow statement can be prepared. One may have to incur extra cost depending on the method employed in the preparation of the financial statement. All methods do not cost the same. A company may have to shell out extra for including additional information in the report.
Last Updated on : 26th June 2013