What Is The Differences Between The Formats Of Financial Statements For Different Types Of Business?

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Rebekah Coulson Profile
Rebekah Coulson answered
Financial statements are formatted four ways: The statement of financial position (balance sheet), the statement of comprehensive income (income sheet), the statement of changes in equity (equity statement), and the statement of cash flow. The difference between them is what they report. A balance sheet reports on assets and liabilities; an income sheet reports on income, expenses and profits; an equity statement reports on equity changes; and a cash flow statement reports on operational, investment and financial cash flow activities. Of these, only the balance sheet applies to a single time point. The other statements detail periods of time.

Balance sheets are typically divided into two sections -- one for assets, the other for liabilities and net worth -- with the two sections working together to show how the company's financial income and output balanced against each other. Balance sheets often vary in complexity depending on the size of the business they detail.

Income sheets are used to show the transformation of revenue into net income and has the simple purpose of showing company managers and investors whether the business made or lost money during a specific fiscal period. There are generally two types of income sheet -- single and multi-step -- with the latter being more detailed than the former as it offers a lengthier breakdown of finances.

Equity statements present a company's changes in retained earnings, which is the portion of net income that the corporation does not distribute and keeps hold of itself. It includes information on dividends, operational profits and losses, and all other charges or credits to these earnings.

Finally, the cash flow statement indicates the effect of the information contained within the above on the company's overall flow of cash, as determined through operational, investment and financial perspectives. This information is most useful to bankers, accounting staff, investors and potential employees.
Anonymous Profile
Anonymous answered
Describe the differences between the formats of financial statements for different types of business.

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