Financial statements summarize the accounting information into a presentable format to assist the users in understanding the performance and financial position of a business.
There are three primary financial statements:
- Statement of Financial Position (or Balance Sheet)
- Statement of Profit or Loss (or Income Statement)
- Statement of Cash Flows (or Cash Flow Statements
The financial statements also include notes, which help the reader understand the numbers
Accounting Period
Users need timely information on a company’s financial statements in order to make decisions, therefore companies must prepare financial statements periodically.
To prepare such statements, accountants divide company’s financial statements into time periods.
These time periods are usually equal in length and are called accounting periods.
An accounting period may be one month, one quarter, or one year.