5 Types of Financial Statements in Accounting You Must Know

5 Types of Financial Statements in Accounting You Must Know

In a company there are many aspects that can affect the condition of your business. There are several ways you can do to monitor the condition of your company. One of them by looking at the company's accounting financial statements. By default, in accounting there are several types of financial statements that must be known, namely:

Income Statement ( Income Statement )

The first report that we will discuss is the income statement. From the name alone, you certainly know that this report serves to show whether the company experienced losses or gains in a financial period.

In addition to knowing the profit or loss, the income statement is made to inform the amount of tax that must be paid by the company, to be an evaluation reference for company management and also to provide information about the efficiency of the steps taken by the company in terms of the amount of expenses incurred.

Basically the type of income statement consists of two forms, namely:

1. Single Step

For this single step form, the flow and also the grouping of accounts is easier. This is because all revenues and profits are placed at the beginning of the income statement. Then followed by all expenses or costs that must be incurred or borne by the company. Well, the difference between total revenue and total expenses is what indicates whether the company profit or loss.

2. Multiple Step

Now, for the income statement in the form of multiple steps, you have to separate operational and non-operational transactions and compare costs and expenses with related income. In this form of income statement, operating income will show the difference between ordinary and incidental activities.

In general there are 2 elements included in the income statement, namely all types of income and losses. Then in this income statement there are several division of profit or loss items namely gross profit / loss, operating profit / loss, profit / loss before tax, net profit / loss and profit / loss from current operations.

Statement of changes in capital

At the beginning of the formation or establishment of the company there will always be initial capital which is the first step for the company to operate. Well, this initial capital amount must change according to the company's performance. Suppose the company in a certain period suffered a loss, then the capital used by the company could be reduced. Conversely, if the company makes a profit, capital will increase.

So in general, the report changes in capital will provide information related to the amount of capital owned by a company in a certain period. In this report, you can see the changes that occur in capital as well as the causes of the changes that occur. Some specific data needed to prepare a report on changes in capital are the initial capital of the period, the taking of personal funds by the owner in the period concerned and also the total net profit or loss of the company in the related period. Considering, to compile a report on capital changes requires income data, it is clear that this report is made after the income statement.

Balance Sheet ( Balance Sheet )

In accounting, the balance sheet is better known as the balance sheet . In general, this report is made to show the condition, position and financial information of a company in a certain period. The preparation of this balance sheet allows you to see some important data such as the amount of company assets, liabilities (debt / liabilities) and equity (capital) of the company.

So overall there are 3 elements that are owned by the balance sheet, namely assets, liabilities and equity. If we return to the basic understanding of accounting, we can conclude that this balance sheet is closely related to the basic accounting formula, i.e.

"Assets = Liabilities + Equity"

Statements of Cash Flows ( Cash Flow Statement )

Cash flow statements are also known as cash flow reports . This report is made to show the company's cash inflows and outflows for a certain period. In addition, the cash flow statement also functions as an indicator of the amount of cash flow in the coming period. The statement of cash flows is also used as an instrument of accountability for cash inflows and outflows during the reporting period.

Examples of cash inflows can be seen from the results or income from operational activities or loans. Then the cash flow out can be seen from the cost burden incurred by the company for investment and operational activities.

Notes to the Financial Statements

Well, the last type of financial statement you should know is the notes to the financial statements. This type of report may still be unfamiliar to you due to the fact that some people are more focused on 4 other financial statements. Though this one financial statement is very important and can help you to better understand the financial statements as a whole.

The notes to these financial statements are made to provide a more detailed explanation related to the matters listed in the other 4 financial statements. Even in this financial statement is also provided the cause or reason relating to the data presented in the financial statements.