What are the Four Basic Financial Statements?

Everyone Should Know

reLight Personal Finance

There are four basic financial statements, and they use by two kinds of users, internal users, and external users. The purpose of financial statements is to provide financial information for decision-making, either for company leaders or investors. It is beneficial for everyone to understand the four basic financial statements expertly if you are interested in finance, accounting, and investing.

Below are the four basic financial statements:

1. Income Statement: It is also called the Profit and Lose statement (PL) in the nonprofit organization. The income statement shows the company’s revenues, expenses, gains, and losses in a month, quarter, or year. You can know if the company makes a profit or not.
2. Balance Sheet: It is also called the statement of financial position. It only shows your financial information at a point in time, either end of the month, quarter, or year. Assets = Liabilities + Stockholder’s Equity is the structure of the balance sheet. It shows you the cash, liability, and equity of the company.
3. The Statement of Changes of Equity: It shows the equity data change from one period to another. Equity includes common stock, retained earnings, paid-in-capital, and treasury stock. It is important to know how companies finance their…