Martin LeFevre is an accounting professional with over ten years of experience. He has prepared and audited multiple statements for business and individuals during his career.
There are three primary business financial statements.
The income statement shows the revenues from sales and other income. The statement of cash flows indicates cash inflows and outflows during a certain period. The balance sheet is a statement of financial condition that shows assets and sources of assets for a business at the end of a certain period.
To understand any of these statements for a business, you need to have an understanding of how the business functions. You first need to know whether the business sells products or services. For example, financial statements for a dry cleaning service are going to be different from the ones from a bank.
The form of a financial statement usually follows the function of the business and the way the business makes a profit.
Dollar amounts in financial statements are usually rounded off. They either do not present the last three digits or the last six digits. Many smaller companies choose to include amounts out to the last dollar or even the last penny. The more digits there are in a dollar amount, the harder it is to comprehend the amount. Financial statements are formal documents. They do not use professional slang or street language. They also rarely include any graphics or artwork in the statements themselves, even though many big public companies include a lot of visual information in their financial reports. This is done by graphic designers and experts once accounting professionals like Martin LeFevre finish preparing the actual reports.
