A business that operates with any kind of product or service needs to maintain its financial statements. This maintenance aids the business owners in knowing the financial position of their firm. This is essential because if one does not know about where their business stands, they can’t make progress. These financial statements are of 8 different types and each of them is equally important to be maintained and reviewed regularly to be up to date about their business. This article will include a detailed explanation of each of the types of financial statements for anyone looking to understand them properly.
Income Statement
An income statement is a statement that records the income earned and expenses incurred in conducting various business activities. The statement also helps one calculate the profit earned through the financial year by deducting expenses from the income earned.
Balance Sheet
Another significant type of financial statement that should be maintained is a balance sheet. A balance sheet is a statement that records the assets that a firm holds and the liabilities it is liable to pay back. The statement also helps in calculating the firm’s equity by deducting liabilities from assets.
Cash Flow Statement
A cash flow statement is another type of financial statement that a firm must maintain. This statement helps business owners to know the cash spent in conducting various business activities. These activities can include operating activities, financing and investing activities.
Management Reports
The major financial statements that every firm should maintain are the income statements and the balance sheet. Apart from this, every firm operates in different industries and has different operations. This is why each firm must maintain their management reports that may include the firm’s specific type of operations only and not the general one.
Accounts Receivables
Accounts receivables are the records that a firm maintains of the debtors of the firm. These people are the ones who have taken goods from the firm but have not made the payment yet. The firm can’t remember every debtor and the amount they’re liable to pay, this is why this statement is maintained.
Work in Process Reports
A work-in-process report is a type of report that is maintained to keep track of the processes that are yet to be completed. These reports are usually used in the construction industry but can be used in other areas as well. For example, the number of hours spent by a lawyer on a case can be recorded and the number of hours remaining to complete the process.
Individual and Group Collections Reporting
Individual and group collections reporting is a part of accounts receivables and is used in big corporations handling a lot of clients. This can be understood by taking an example of a law firm. For example, a firm has a team of lawyers whose accounts are maintained in a different report and the individual reports of accounts of individual lawyers.
Conclusion
There are various types of financial statements that a firm can maintain to stay up to date about the financial position of their firm. These statements can include profit and loss statements, balance sheets, cash flow statements, work-in-process reports, individual and group collection reports, accounts receivables, etc. Apart from this, one can get an even better understanding of each of these statements from the platforms such as PowerUp Money. They provide easy and detailed information about these statements which can be referred to and understood by anyone.
