Financial Statements: List of Types and How to Read Them

On the other hand, interest expense is the money companies paid in interest for money they borrow. Some income statements show interest income and interest expense separately. The interest income and expense are then added or subtracted from the operating profits to arrive at operating profit before income tax. Different countries have developed their own accounting principles over time, making international comparisons of companies difficult. To ensure uniformity and comparability between Financial Statements prepared by different companies, a set of guidelines and rules are used.

The RevenuesRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions. The balance sheet provides the details of the company’s sources and uses of funds. If a company has a debt-to-equity ratio of 2 to 1, it means that the company has two dollars of debt to every one dollar shareholders invest in the company. In other words, the company is taking on debt at twice the rate that its owners are investing in the company. Pension plans and other retirement programs – The footnotes discuss the company’s pension plans and other retirement or post-employment benefit programs. The notes contain specific information about the assets and costs of these programs, and indicate whether and by how much the plans are over- or under-funded.

Financial Statements

International companies may use a similar but different set of rules called International Financial Reporting Standards . It provides insight into how much and how a business generates revenues, what the cost of doing business is, how efficiently it manages its cash, and what its assets and liabilities are. Financial statements provide all the detail on how well or poorly a company manages itself. Last, financial statements are only as reliable as the information being fed into the reports. Too often, its been documented that fraudulent financial activity or poor control oversight have led to misstated financial statements intended to mislead users. Even when analyzing audited financial statements, there is a level of trust that users must place into the validity of the report and the figures being shown.

• An often less utilized financial statement, a statement of comprehensive income summarizes standard net income while also incorporating changes in other comprehensive income .
• To track financial results on a trend line to spot any looming profitability issues.
• The trust holds the donated investment assets from Bill Gates and Melinda French Gates and receives contributions from Warren Buffett.
• On a balance sheet, assets are listed in categories, based on how quickly they are expected to be turned into cash, sold or consumed.
• We post our audited financial statements and 990-PFs to the site as they become available.
• Primary expenses are incurred during the process of earning revenue from the primary activity of the business.
• Some candidates may qualify for scholarships or financial aid, which will be credited against the Program Fee once eligibility is determined.

For example, a business that relies on government contracts might report robust results for its most recent period, and yet have no additional sales on tap, since it just completed all of the contracts that it had been awarded. Most income statements include a calculation of earnings per share or EPS. This https://wave-accounting.net/ calculation tells you how much money shareholders would receive for each share of stock they own if the company distributed all of its net income for the period. Interest income is the money companies make from keeping their cash in interest-bearing savings accounts, money market funds and the like.

Statement of change in equity

Financial statements that are being issued to outside parties may be audited to verify their accuracy and fairness of presentation. These are expenses that go toward supporting a company’s operations for a given period – for example, salaries of administrative personnel and costs of researching new products. Operating expenses are different from “costs of sales,” which were deducted above, because operating expenses cannot be linked directly to the production of the products or services being sold. We all remember Cuba Gooding Jr.’s immortal line from the movie Jerry Maguire, “Show me the money! They show you where a company’s money came from, where it went, and where it is now.

The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each.

Your essential guides to financial statements

It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company. This brochure is designed to help you gain a basic understanding of how to read financial statements. Just as a CPR class teaches you how to perform the basics of cardiac pulmonary resuscitation, this brochure will explain how to read the basic parts of a financial statement.

These notes include explanations of various activities, additional detail on some accounts, and other items as mandated by the applicable accounting framework, such as GAAP or IFRS. The level and types of detail provided will depend on the nature of the issuing entity’s business and the types of transactions in which it engaged. A reporting entity only includes the minimum mandated amount in the supplementary notes , because it can be quite time-consuming to produce the disclosures. The second part of a cash flow statement shows the cash flow from all investing activities, which generally include purchases or sales of long-term assets, such as property, plant and equipment, as well as investment securities. If a company buys a piece of machinery, the cash flow statement would reflect this activity as a cash outflow from investing activities because it used cash.

What are Financial Statements?

Peggy James is a CPA with over 9 years of experience in accounting and finance, including corporate, nonprofit, and personal finance environments. She most recently worked at Duke University and is the owner of Peggy James, CPA, PLLC, serving small businesses, nonprofits, solopreneurs, freelancers, and individuals. The trust holds the donated investment assets from Bill Gates and Melinda French Gates and receives contributions from Warren Buffett. The primary role of the trust is to manage the investment assets and transfer proceeds to the foundation as necessary to achieve the foundation’s charitable goals.

Financial accounting is the process of recording, summarizing and reporting the myriad of a company’s transactions to provide an accurate picture of its financial position. Below is a portion of ExxonMobil Corporation’s cash flow statement for fiscal-year 2021, reported as of Dec. 31, 2021. We can see the three areas of the cash flow statement and their results. Investing activities include any sources and uses of cash from a company’s investments in the long-term future of the company.

Financial Report and Unaudited Condensed Financial Statements for the Nine Months Ended September 30…

If so, the controller generally uses a format that approximates the layout used for external reporting, though it may contain some additional detail that would be considered excessive by outsiders. The additional level of detail is used by managers to monitor the business. Assets are generally listed based on how quickly they will be converted into cash. Current assets are things a company expects to convert to cash within one year. Most companies expect to sell their inventory for cash within one year. Noncurrent assets are things a company does not expect to convert to cash within one year or that would take longer than one year to sell. Fixed assets are those assets used to operate the business but that are not available for sale, such as trucks, office furniture and other property.