Many organizations use a balance sheet, income statement, and cash flow statement as the three main financial reporting documents (Herrmann, 2015). Each of these financial statements contains different information. The balance sheet provides information about the assets and liabilities that the corporate organization has as at a specific date. Moreover, the balance sheet also provides information about the shareholder’s Equity in the business (Hussey & Ong, 2017). An income statement provides information about the revenue that the business has generated over a specific period. It also indicates the costs as well as expenses that the business has incurred in generating the revenue within the stipulated period. The cash flow statements contain information about the inflow as well as the outflow of cash within the business.
Each of these statements helps decision makers in making critical decisions in different ways. The balance sheet indicates the financial position of the business as at a specific time. Investors use information about the financial standing of the business in deciding whether to invest in the business. Creditors equally, use the balance sheet information in determining the amount of credit to advance to the business (Hussey & Ong, 2017). Financial statements indicate the profitability of the business. It helps investors in determining whether investing in the business will help them get returns on their investments. Government agencies equally use the income statements in determining the amount of tax to be imposed on the organization (Lessambo, 2014). Cash flow statements show how the business can meet its daily financial obligations. It helps creditors in determining whether the business is creditworthy.
Corporate financial statements
Corporate financial statements are those statements generated and used by corporation type of businesses. On the other hand, non-corporate financial statements are those statements used by the non-corporation type of business such as sole proprietorships and partnerships. Secondly, corporation financial statements highlight the owner equity section that highlights shareholders equity, dividends paid and outstanding shares of stocks (Crawford & Weirich, 2011). On the contrary, non-corporation financial statements only list the contribution of the business owners.
Crawford, R. L., & Weirich, T. R. (2011). Fraud guidance for corporate counsel reviewing financial statements and reports. Journal of Financial Crime, 18(4), 347-360.
Herrmann, F. (2015). Financial Statements. Analysis of Financial Statements, 4(2), 37-61.
Hussey, R., & Ong, A. (2017). Business Combinations and Consolidated Financial Statements. Corporate Financial Reporting, 16(9), 283-307.
Lessambo, F. I. (2014). Audit of group financial statements. The International Corporate Governance System, 12(6), 202-215.