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What is a Financial Statement

A Financial Statement is a report which tells how the financial situation in the company is at a specific time.

It is usually made once a year. But you can also make a financial statement every three month.

There are two main subjects in the report:

1. Profit and Loss Statement

The Profit and Loss statement tells about the earnings and spendings of the company during the year. This means how much income has the company had from the daily running of activities and how much has the company spent on the same activities.

The Profit and Loss statement part of the Financial statment tells whether the activities have been running as a profitable business in the period or not. It is called the Profit and Loss Statement.

2. Balance Statement

The other main statement in the report is the Balance Statement which shows the actual value of the company as such. This means how much money is present in the company in total when the value of buildings, tools, stock, money in the bank account and in the cash box etc. is added.

It also shows how much the company owes to others. A company normally owes money to suppliers, the bank and to the owner of the company.

Where does the financial statement come from

The statement reports are generated by your PC bookkeeping programme or your accountant´s programme. The statement is generated from the invoices entered in the bookkeeping programme.

If you have entered all your vouchers correctly during the year, the statements will give a true financial picture of your business.

To be able to read the statement you must know the elements in it.
- Go to next business issue: The Profit and Loss Statement


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