A financial statement template is basically the official record of all financial activities of an individual or business concerned during any specific time period. In other words, it is a financial report which describes the financial position of a business or firm during a specific time frame. The purpose of a financial statement is to reflect a business’s performance during a fiscal year. It explains to users many crucial factors, like capital injections, working capital expenditures and liabilities, investments and current short term as well as long-term assets. It can be compiled at specific time intervals, such as; after half, quarter or one year, which is further based on the organization’s policies. The reason why a financial statement is prepared basically reflects information regarding four main reporting segments; balance sheet, income statement, cash flow statement, and statement of retained earnings or owner’s equity.
Balance Sheet:
A balance sheet reveals the financial position of an organization after sorting out the current value of assets, liabilities and owner capital.
Income Statement:
This statement presents the current income and expenditures of a company during a financial year. It further highlights the accurate information of net profit or net loss during that period.
Cashflow Statement:
This statement shows the company’s cash flow activities such as investing activity, financial activity and operating activity.
Statement of Retain Earnings:
This statement shows the company’s reserved amount after the financial year-end.
Purpose of Financial Statement
A financial statement serves many purposes, not only for its organization, but also to other members and stakeholders. By reviewing a financial statement, it should represent valuable information to all its stakeholders, otherwise it would be a useless activity. Management and other stakeholders can make vital decisions by reviewing the financial health of an organization through a financial statement.
Apart from assisting management and stakeholders in making worthy decisions, a financial statement serves many other purposes, which are as:
• A financial statement plays a major role in the decision making of financial institutions.
• It presents the current and future operations changes.
• It is used as a guiding tool in collective bargaining agreements.
• Auditors used this statement in investing critical factors which may reflect positively or negatively on stakeholders while making financial decisions.
• Many stakeholders used this statement while making investment related decisions.
• It explains the company’s current financial position and what factors can change it in the future.
• A financial statement is the best tool to check the profitability of an organization.
• Tax consultants also prefer to use this format while calculating taxable income and making decisions related to taxation.
• It attracts many investors in the general public to invest their savings.
• A financial statement also serves competitors while measuring their financial strengths.
• While submitting various tax returns, a financial statement is also helpful for a company.
• For outsiders, it is like a cave where they can sit and discuss it.
• It is the formal presentation of company cash flows.
• It is also helpful in making credit decisions.
