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What Is The Elements Of Financial Statements?

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Connor Sephton answered
Financial statements are the record of financial activities of a person, business or organization. In the United Kingdom, it is also referred to as an account. A financial statement is the language of businesses and finance, because it conveys the performance and conditions of businesses and of an individual person. All significant and related financial information are shown in a concise and precise manner.

The following are the elements of a financial statement:

1. Assets refer to the resources of an individual or the business entity. It is managed and controlled by the person or the enterprise from which potential and upcoming economic benefits are projected.
2. Liabilities are the current obligations of an individual or the corporation. It arises from past transactions and will be settled upon the expected returns from the economic benefits.
3. Equity is identified as the residual interest in the form of the individual or business' assets after deducting all liabilities. It is also known as the "owner's equity."
4. Financial performance indicates income and expenses which also includes gains and losses. Income is the improved economic benefits for an accounting period. It is in the form of inflow or rise in assets or reduction of liabilities which correspondingly results in increase in equity, excluding the contributions made by equity participants like shareholders and partners. On the other hand, expenses are the decline in economic benefits for the accounting period. It is in the form of outflows or the diminution of assets or incurring liabilities which results in a drop in equity.
5. Financial position is also known as the balance sheet for a particular period. It includes the assets, liabilities and equities.
6. Profit and loss statement is the account of the complete and all-inclusive income of a certain period.
7. Entry of statement of changes in equity also includes cash flows. It illustrates the profits or losses of a particular period as well as the individual or the business's financing, investing and operating activities.
8. The Notes include the abstract of the accounting policies and other advisory notes.

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