An Introduction to Financial Statements
- Financial statements can be used to help a business determine how successful it has been in achieving its objectives over a given period of time
- In particular, stakeholders can use financial statements to answer a range of questions
Diagram: Stakeholder use of Financial Accounts
Financial accounts can help stakeholders answer a range of questions
- At the end of the financial year, companies must produce a set of financial statements that include two key documents
- The statement of profit or loss shows the revenue earned, costs incurred and profit (or loss) made by the company over the previous year
- The statement of financial position shows the assets owned, liabilities owed and net worth of the business at a particular point in time (usually the last day of the accounting period)
- These financial statements must be submitted to the relevant government agency and can usually be viewed by any interested party
- Sole traders and partnerships also commonly produce these documents in order to assess their performance