Financial Statements (a.k.a Financial Reports) are formal records of the financial activities and position of a business at a specific point in time. Relevant financial information is presented in a structured manner and in a form which is easy to understand.
They (may vary depending on the country) typically include four basic financial statements accompanied by a management discussion and analysis or a financial statement footnotes to provide a narrative explanation, through the eyes of management, of how an entity has performed in the past, its financial condition, and its future prospects
Profit and Lost (P&L) Statement
Profit and Lost statement (abbr. P&L) which is also referred to as Income Statment is a financial document that shows the profitability of a business. It details how much money the business earned and spent.
Here is an example of a P&L statement
The profit and loss statement is also a component to build 3-statement financial model.
A balance sheet is a statement of financial position, or reports on a company’s assets, liabilities, and owners equity at a given point in time. In other words, it shows what the company owns and how much it owes at the end of the period. It is based on the equation: Assets = Liabilities + Shareholders’ Equity.
Here is an example of a balance sheet
The balance sheet is also a component to build 3-statement financial model.
Cash Flow Statement
The cash flow statement, sometimes called a statement of changes in financial position, shows how money has moved through your business during the period. In other words, it shows cash flow activities of a company, particularly its operating, investing and financing activities over a stated period.
Here is an example if a cash flow statement
The cash flow statement is also a component to build 3-statement financial model.
Statement of changes in equity
A statement of changes in equity (a.k.a statement of equity or statement of retained earnings) reports on the changes in equity of the company over a stated period after any dividends or distributions to shareholders. It also shows the change in the retained earnings account between the opening and closing periods on each balance sheet.
Here is an example of a very basic statement of changes in equity