There are many different financial statement forms that one can generate using accounting software or written ledgers. The most common financial statement forms are balance sheets, income statements, expense statements and cash flow analyses. With modern software, however, the number of ways to manipulate data in order to review profit, expenses, or net worth at any given time is nearly infinite.
The most common financial statement forms are balance sheets and income statements. The first, a balance sheet, takes a snapshot of a company at one particular date and time in order to show the net worth and overall health of a company. A balance sheet lists a company’s assets and liabilities as well as owner’s equity and net worth.
An income statement is also called a profit-and-loss statement. It lists sales and gross profit margin and then lists all expenses incurred during the same period in order to determine if the time was profitable or if it showed a loss. The income statement analyzes a period of time instead of taking a snapshot at one time like the balance sheet. For example, financial statement forms like an income statement will analyze a particular month, quarter, or year and show all sales as well as fixed and variable expenses for that same period in order to show profitability.
Expense statements are other types of financial statement forms. Unlike an income statement which shows both income and expenses, an expense statement shows only expenses. Business owners and decision-makers can analyze expense statements to find out just how money is leaving the company. Examples of large expenses are the cost of raw materials, payroll, electricity and many others.
A cash flow analysis is also known as a statement of cash flow or cash flow proforma. Like an income statement, the cash flow analysis covers a period of time instead of a particular moment. It reviews the ins and outs of cash over a designated time period like a month or a quarter. A cash flow analysis can be used in two ways. It can either review a time in the past and compare expected to actual cash flow, or it can be used to project into the future with predicted cash flow.
Most accounting software can generate these types of financial statement forms with just one click, provided the information input into the system is accurate and complete. These statements are very difficult to generate with written ledgers. As with any data, however, the adage “garbage in, garbage out” applies, and the accuracy of the statements is only as good as the accuracy of the data being input.
