Question

Name and define the three formal financial statements.

Answer 1

1. Balance sheet

A balance sheet is a statement of the financial position of a business that lists the assets, liabilities, and owner's equity at a particular point in time.

2. Income statement

An income statement or profit and loss account of a company and shows the revenues and expenses during a particular period. It indicates how the revenues are transformed into the net income or net profit.

3. Cash flow statement

A cash flow statement shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.