What are financial statements?
Financial statements are records created to show the financial activities and condition of a person or a business entity.
What is the breakdown of financial statements?
Since financial statements are compiled data from financial transactions, it needs to be broken down into different areas once calculated. We start with a balance sheet that shows the overall assets, liabilities and equity of the business. Then, we have income statements that covers a range of time, usually compiling data over two to three years. Next, we have a cash flow statement. It merges the balance sheet and the income statement. Since the net income can get out of line with the cash flow, the cashflow statement fixes the income statement with the balance sheet. Lastly, there is the statement of retained earnings, it is the least used one and it is commonly for audited financial statements.