A financial statement template is a document that contains an official record of an entity’s (either an organization or an individual) financial activities. The financial statement measures your company’s performance, financial strength, and liquidity. This statement also indicates the financial effects of events and business transactions of your company.
Table of Contents
- 1 What is a financial statement?
- 2 Different types of financial statements:
- 3 How to write a financial statement?
- 4 How to read a financial statement?
- 5 Conclusion:
What is a financial statement?
At a certain point in time, you can also explain a financial statement template as a snapshot of your financial position. It describes your assets, net worth, and liabilities. Ideally, the difference between your assets and liabilities should be your net worth. You have more assets liabilities if you come up with a positive net worth. On the other, in case of a negative result, you have more liabilities than assets. You may also like financial projections template.
Different types of financial statements:
Let us discuss below different types of financial statements;
It is the most well-known financial statement. It has your financial information for a specified period of time such as expenses, revenues, and loss or profit. Since it allows you to assess and measure your financial performance from one period to another so it is also known as the Statement of Financial Performance.
The balance sheet reflects you the balance of your liabilities, assets, and equity by the end of a certain time period. This is also called the Statement of Financial Position. Additionally, it also indicates you the values of your net worth. You can identify your net worth by taking the difference of your liabilities and total assets.
Statement of change in equity
By the end of a certain accounting period, this type of financial statement indicates your company’s shareholder contributions, equity movements, and equity balances. The information mentioned in this statement includes the following;
- The classification of share capitals
- Total share capitals
- Retain earnings
- Dividend payments
- Other state reserves
Statement of cash flow
The statement of cash flow indicates the movement of your cash during a certain period of time. This statement helps you in understanding your cash movement. Moreover, it has three sections;
- Cash flow from your operation
- Cash flow from your investments
- Cash flow from your financing activities
Note to financial statements
This essential statement is often overlooked. It is a requirement by the IFRS. You disclose all of the information that matters so via this statement. Use note to financial statement to detail your financial information associated with specific accounts.
How to write a financial statement?
Your financial statement should include the following elements;
The possible economic benefits that an external entity gets and manages on previous transactions are known as assets.
During a certain period from events, circumstances, and transactions from outside sources, this is a change of equity. It generally includes all of the amendments in equity during the defined period other than those coming from distribution to and investments.
Distributions to owners
In net assets, these are reductions brought about by rendering services, incurring liabilities or transferring assets to owners. In addition, the distributions to owners lessen ownership interest.
After you have deducted the liabilities, this is the residual interest in the remaining assets. Equity in a company refers to the ownership interest.
Expenses are the outflows incurring liabilities or assets that are used during a specific period from producing or delivering services or goods.
These are the equity increases. They come from business transactions and all types of other transactions other than the ones that come from the investments or revenues.
Investments by Owner
From other entities to enhance or get ownership interest, these are the net asset increases resulting from the transfers of something valuable.
To give services or transfer assets in the future due to events or transactions made in the past, these are the possible sacrifices of economic benefits in the future from current obligations.
Unlike gains, losses are the equity decreases from all events, circumstances, and business transactions. They affects your business during a specific time period aside those which result from distributions or expenses.
From rendering services, producing or delivering goods or other activities that constitute your central operations, during a certain time period, these are the enhancements or inflows of assets or a settlement of liabilities.
How to read a financial statement?
Let us learn below how to read financial statements;
Reading a balance sheet
A balance sheet imparts your company’s “book value.” With the help of this document, you can see the resources your company has. Also, you can see how you financed these resources as of a specified date. The document indicates your company’s liabilities, owner’s equity, and assets.
Reading an income statement
For a certain time period, this document provides you a summary of the cumulative effect of gain, expense, loss, and revenue transactions. As part of your company’s annual or quarterly report, you would share this. It indicates information on the following;
- Business activities
- Financial trends
- Over set time periods
Reading a cash flow statement
The main objective of this statement is to provide you a detailed snapshot of what happens to your company’s cash during a specific time period. It indicates how your company has the capability to work in the long- and short-term on the basis of cash that flows into and out of your company. You should also check Monthly financial management report template.
Reading an annual report
An annual report is a written report that you have to publish annually to your shareholders. It explains your company’s financial and operational conditions. Additionally, it provides you insights about the following;
- Your industry
- An evaluation and discussion of your accounting policies
- Your company’s management team
- Additional information about the company’s investors
In conclusion, a financial statement template is an essential tool used to report financial activities to your potential creditors and investors. This statement comes in different types. The financial statement is also considered as a snapshot of your financial position at a certain point in time.