QandAs: Legal

What is a Financial Statement?

Answer:
Financial statements are written,

or computerized, documents that provide a summary of a company’s profit or loss during a given period of time. Four basic types of financial statements include balance sheets, cash-flow statements, statements of retained earnings, and income statements.

Financial statements show a company’s assets and liabilities during a given period of time as well as the operating expenses for the business. These statements are utilized to evaluate a company’s operating performance. A business owner can use a financial statement to track areas of their business that may have unnecessary or unexpected expenses. Financial statements are required by lenders, investors, and banks to help in determining possible credit limits for a business. The statements are also utilized to determine the appropriate tax liabilities for a company.

Larger corporations usually have accounting and legal departments which handle the company’s financial records. Small business owners are more likely to handle their financial statements in-house; therefore, it’s wise for these business owners to seek additional advice from a tax attorney or a certified public accountant.