Definition of Financial Statements
Financial statements or final accounts are the yearly accounting records prepared in five different sets of formats that are collectively called financial statements. The financial statements tell the users about the financial position, financial performance, cash position, and equity position of the business.
The five components of the financial statements are:
1. Statement of financial position or Balance Sheet: This contains information about a business's assets, liabilities, and equity.
2. Statement of Comprehensive income: This contains the information about the incomes and expenses during a period and ultimately the profit or loss for the period.
3. Statement of Cash Flows: This tells about the actual cash position of the business.
4. Statement of changes in equity: This tells the equity components that have affected in the current year.
5. Notes to the financial statements: These are the supporting information about the figures appearing on the faces of all four statements described above.