As a finance student, you must know that finance is a subject that deals with money management. Financial management is essential everywhere, whether running a business, an organisation, or managing household chunks. That’s why knowing about financial statements and their types is necessary. This will help you understand how many financial statements one needs to prepare to evaluate their business’s growth. 

So, this post helps you to understand what financial statements are and their types. You must understand if you want a promising career in this field. Moreover, if you explain this topic efficiently in your assignment, you will surely secure higher grades. But, if you are facing challenges, you can take finance assignment help from professional writers. There are many proficient writers available online to assist you with your writing tasks.  So, let’s move ahead and now talk about financial statements in detail.

What Are Financial Statements?

A set of records called financial statements is used to keep track of business transactions and assess a company’s financial performance. Every firm must create financial statements to display its sources of income, assets, and liabilities. Additionally, every organisation must provide a yearly comprehensive report to assess how it performed from the previous financial year to the current fiscal year.

All organisations must prepare authentic, accurate, and understandable financial statements. This positively impacts the company and increases its goodwill in the market. Also, the high-level management gets help in decision-making through these financial statistics, as every organisation plays a vital role in economic decisions. Moreover, the main reasons why one should create financial statements are listed below: 

1. To make credit decisions like increasing their credit limit or restricting it to the same.
2. To make investment decisions like where to invest and the price per share.
3. It helps in taking taxation decisions. For example, the government can tax a business based on its assets or income.

That’s why financial statements are vital to every organisation’s growth and development. Now that you know about financial statements, let’s lay some focus on their types. There are actually three different kinds of financial statements, but the other two are just as significant. To help you comprehend the financial health of the organisation, the following five types of financial statements will be discussed in this article: 

1. Balance Sheet
2. Income Statement
3. Cash Flow Statement
4. Statement of Change in Equity
5. Notes to Financial Statements 

So, these are five types of financial statements, which are explained below in detail:

Types of Financial Statements

Balance Sheet

It is a summary of an organisation’s monetary transactions to keep track of assets, liabilities, and shareholder equity.

You can evaluate it by using this simple equation:

Asset = Liabilities + Shareholder’s Equity

So, a balance sheet is prepared to record all the transactions accurately. That’s why equalising the debit and credit columns in the balance sheet is necessary to get accurate results.

Income Statement

Every organisation needs to record what comes in and what goes out to evaluate the profit margin. For this, they must prepare an income statement, commonly called a profit and loss statement. All the transactions in a financial year are recorded in this financial statement, like income, expenses, and losses, to know the exact percentage of profit.

Also Read:- Should You Use Technology for Assignment Writing? Know the Answer!

Statement of Cash Flow

You need to prepare this statement to determine the flow of cash within an organisation. How much amount is coming in or going out? To determine the net income or loss, you must execute data from the balance sheet, profit and loss statements, and income statements. Thus, this clarifies the changes in future cash flow. For instance, if more money is received and less is expended, the cash flow is positive. Similarly, negative cash flow occurs when more money leaves and less money enters.

Statement of Change in Equity

During a financial year, the closing balance of equity and the equity shareholder’s contribution determines the change in equity. The formula to evaluate a shareholder’s equity is:

Shareholder’s Equity = Total Assets – Total Liabilities

So, by preparing a statement of change in equity, you can calculate the company’s value. Moreover, it shows:

• Net profit/loss
• Purchase of shares
• Dividend payments to shareholders
• Effects of changes due to errors occurring in the accounting period
• Change in the value of investments

Notes to Financial Statements 

As per International Financial Reporting Standards (IFRS), it is mandatory for all businesses and organisations to add notes to their financial statements. They clearly said that all must disclose their company’s financial information in their accounts. But most organisations don’t do that. The purpose of creating this financial statement is that the assets you showed in the balance sheet are explained in detail in this statement. This shows that you are following all the standards and regulations properly.

So, you must know these five types of financial statements while writing finance assignments. But always remember that there is a set order to prepare these financial statements, i.e.,

1. Income Statement
2. Cash Flow Statement
3. Statement of Changes in Equity
4. Balance Sheet
5. Notes to Financial Statements

All financial statements are interlinked, so it’s very important to follow the exact order to avoid any mistakes in your accounts.

Conclusion: Types of Financial Statements

Now that you know what a financial statement is and its types, you can quickly write your finance assignments. But if it creates confusion in your mind and you cannot write your paper, then you can take finance assignment help from professionals. The assignment writers are well-versed and know how to prepare finance assignments.

So, you can hire them to obtain thoroughly researched and high-quality documents. You may locate subject-matter experts by searching for assignment writing services in the UK online. There are a tonne of websites that offer this service. Therefore, select one, give your writing task to them, and get the handwritten assignment from experts. This is the easiest way to get support from specialists. So, if you are facing trouble, grab this opportunity and contact them anytime for assistance.