The balance sheet, income statement, statement of owner’s equity, and the statement of cash flows, are each examples of financial statements. These four types of financial statements are used by businesses for reporting as required by the authoritative set of standards known as the U.S. GAAP, Generally Accepted Accounting Principles. The balance sheet, income statement, statement of owner’s equity, statement of cash flows and the U.S.GAAP, have been officially adopted by the SEC Securities and Exchange Commission, according to QuickMBA.
The balance sheet reports the financial position of a business at a specific point in time. The balance sheet allows creditors and investors to view the assets, equity, and liabilities, of a company to determine its financial standing. The income statement deducts the expenses from the revenues for a specified period with a starting and ending date. The income statement allows companies to evaluate operating performance, according to BusinessTown. The statement of owner’s equity, which is also called the statement of retained earnings, or equity statement, shows the beginning balance and any deductions from the shareholder’s equity account, during a specific period. The statement of cash flows tracks the origins and uses of cash, which helps creditors and investors to determine if the company has enough cash to pay for immediate expenses.