What are financial statements?

A financial statement

consists of three components: a balance sheet, the statement of income, and statement of changes in equity. A balance sheet is also known as the statement of financial position, which reports the financial position at a specific point in time. It consists of three elements.

Assets: these are resources controlled by the firm.

Liabilities: amounts owed to lenders and other creditors.

Owner’s equity: the interest in the net assets that remain after deducting liabilities. Thus, assets equals liabilities plus owner’s equity. Here is an example of a statement of financial position from the Woolworths Group Annual Report 2019. You’ll notice items for current assets, noncurrent assets, current liabilities, noncurrent liabilities, and equity. The statement of income is also known as the statement of profit and loss. This reports on the financial performance of the firm over a period of time, the same period of time as the balance sheet. It has various elements, revenues, expenses, and other income. Here is an example of a statement of profit or loss from the Woolworths Group Annual Report 2019.

A cashflow statement is the final component of a financial statement. This focuses on the company’s cash receipts and payments.

In particular, it focuses on: operating cash flows, the cash effects of transactions that involve the normal business of the firm; investing cash flows, for example, sale of property, plant and equipment, stocks and investments in other firms; financial cash flows. Here is an example statement of cash flows from the Woolworths Group Annual Report 2019.