Financial statements are summaries of monetary data about an enterprise. The most common financial statements include the Balance Sheet, the Income Statement, the Statement of Cash Flows and the Statement of Retained Earnings. Some or all of these are required for publically traded companies or closely held businesses depending certain criteria. These statements are used by a wide variety of entities within and outside of the organization.
The Balance Sheet is a summary of the financial balances of the businesses assets, liabilities and equity accounts as of a specific date listed on the balance sheet. The Balance Sheet provides a snap shot of what the company looked like on an individual day and it is the only financial statement which applies to a single point in time of a business calendar year.
The Income Statement (sometimes referred to as the Profit and Loss Statement) provides the user with data regardless of the company’s revenues and expenses during a particular period. It indicates how the revenues are transformed into the net income. The purpose of the Income Statement is to show whether the company made or lost money during the period being reported. The Statement of Cash Flows shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities.
The Statement of Cash Flows provides information on a firms liquidity and solvency and its ability to change cash flows in future circumstances, provides additional information for evaluating changes in assets, liabilities and equity, improves the comparability of different firms’ operating performance by eliminating the effects of different accounting methods, and indicates the amount, timing and probability of future cash flows. The statement of retained earnings explains the changes in a company’s retained earnings over the reporting period. Retained Earnings break down changes in the owners’ interest in the organization and in the application of retained profit or surplus from one accounting period to the next.
Financial statements are an important tool for management decision making. Financial statements also represent your business to lenders, partners, potential buyers and other interested parties. Rink & Robinson, PLLC will work closely with your key personnel to develop and finalize accurate and timely financial statements