WHAT ARE THE FINANCIAL STATEMENTS IN ACCOUNTS?

Transcending from the trial balance, the financial statements will need to be prepared using the closing balances derived from the trial balance. The two main financial statements are the:

·        Statement of profit or loss (profit or loss account) and the

·        Statement of financial position (balance sheet)

Then there are also the following financial statements prepared by large companies:

·        Statement of cash flows

·        Statement of change in equity

Statement of profit or loss

This is a financial statement which summarises the total income and the total expenses in a business over a period of time and it reflects whether the business made a profit or a loss for that period.

Statement of financial position

This is a financial statement which summarises all the assets and liabilities of a business as at the end of an accounting period. It represents the financial position of the business shown in terms of the assets owned by the business and the liabilities owed by the business as at the end of a set accounting period.

Statement of cash flows

This is a financial statement which summarises the movement of money in and out of a business over a period of time showing what the business has received money for and what the business has spent money on. It shows the amount of money maintained by the business at the beginning and at the end of an accounting period.

Statement of change in equity

This is a financial statement which summarises the changes in the capital and reserves which are attributable to the shareholders. It shows the amount of equity maintained by the business at the beginning and at
the end of an accounting period and the movements which would have taken place during the year, including dividends distribution.