Financial Statements

Definition

Financial Statements is a collection of disclosures, typically by incorporated legal entities

Common Financial Statements

The precise composition (number, title and content of financial statements) is part of the Financial Reporting Standards under which an entity is Reporting its financial condition. A typical set includes:

• The Balance Sheet or Statement of Financial Position offers a snapshot of a company's assets and liabilities at a given point in time.
• The Income Statement or Profit and Loss Statement profit and loss report (P&L report)
• The Cash Flow Statement reports on an entity's Cash Flow
• The Statement of Comprehensive Income, or statement of revenue & expense
• The Statement of Changes in Equity or statement of equity, or statement of retained earnings

Fundamental Requirements

Reporting on the state of an entity over time requires in principle only two types of reports:

• A Stock Variable report that lists measured characteristics of an entity at a snapshot of time
• A Flow Variable report that lists changes in measured characteristics over an interval of time

These two fundamental reports are in principle linked via identities (conservation laws) that stipulate that changes in stock variables are affected only through flow variables.

See Also

• Assets versus Liabilities
• Stock versus Flow Variables