What is the purpose of financial information?
For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. They typically include four basic financial statements:
1. Balance sheet: also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity at a given point in time.
2. Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state.
3. Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period.
4. Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities.
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