5 Types Of Financial Statements And Their Definitions



Financial statements are reports that provide detailed company financial information including assets, liabilities, equity, income and expenses, shareholder contributions, cash flows, and other related information over a certain period of time.

Based on Financial Accounting Standards, there are 5 types of financial statements. The following is an explanation of the types of financial statements and their meaning.

1. Income Statement

The income statement is one of the financial statements of a company that reports three main financial information within a certain time period, namely income, expenses, and profit or loss.

An income statement is sometimes called a statement of financial performance because it allows users to assess and measure the financial performance of a company from period to period from similar companies, competitors, or the company itself.

There are 2 formats for compiling profit and loss, namely:

  • Single Stepalso referred to as the direct method, which adds up the top-down income into a group, then reduces it by the total cost or expense in a predetermined period.
  • Multi Step, also known as a gradual method, separates income into 2 categories, operating income and non-operating income. Operational means based on the main activity, while non-operational means based on outside the main activity.

The three main pieces of information in the income statement:

  • Income

Income refers to the sale of goods or services that a company produces during a certain accounting period.

The income presented in the income statement is the income generated from cash sales and credit sales. In the revenue section, you can find out how much the company made net sales for the period it covers.

Revenue is usually reported as a summary in the income statement and if you want to check the details, you may want to check the records for income provided in the financial statements.

In the notes to the financial statements, users can see the different revenue lines the company generated for the period. This helps users to understand which revenue streams are significantly increasing or decreasing.

  • Expenditure

Expenditures or expenses are operational costs incurred by the company for a certain accounting period.


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