Financial Statement

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End result of financial accounting is Financial Statement. It consists of income statement, statement of owners’ equity balance sheet, cash flow Statement and ending notes.


financial statement


Companies prepare four financial statements from the summarized accounting data:

Income Statement

An Income Statement presents the revenues and expenses and resulting net income or net loss for a specific period of time. It shows result of operation for a certain time period. Income statement is sometime called ‘flow statement’ or ‘period of time’ statement.


Statement of Owner’s Equity

Statement of Owner’s Equity summarizes the changes in owner’s equity for a specific period of time. In case of company this statement is also called statement of shareholder’s equity or statement of retained earnings.


Balance Sheet

Balance Sheet reports the assets, liabilities, and owner’s equity at a specific date. This statement show financial position for a specific point in time. Balance sheet also called statement of financial position or statement financial condition.


Cash Flows Statement

Cash Flow Statement Summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time, these statements provide relevant financial data for internal and external users. Cash flow statement is divided into three sections, operating activities, investing activities or financing activities.


Notes to the Financial Statement

The annual report contains the primary financial statements, notes to the financial statements and accompanying information. Notes to the financial statements are essential in amplifying and explaining the primary financial statement.


Example 1:

Prepare an Income Statement, a Retained Earnings Statement, and a Balance Sheet for the medical practice of Aftab Ahmad from the items listed below for the month of October 2017:


Retained earnings (October 1)       Rs. 15,000               Common stock            Rs. 30,000

Accounts payable                                 6,000                  Equipment                            29,000

Service revenue                                   23,000                Dividends                               6,000

Supplies expense                                 3,500                  Cash                                         13,000

Utilities expense                                   700                     Supplies                                  2,800

Salaries and wages expense               7,000                  Accounts receivable             10,000

Rent expense                                        2,000



financial statement


financial report


accounting statements


>>> Practice Financial Statement Examples.


Example 2:

Use the following accounts and information to prepare, an Income Statement, a Retained Earnings Statement, and a Balance Sheet for Usman Abdullah Industries for the month ended August 31, 2017.


Accounts payable                Rs.  1,100                  Dividends                     Rs.  3,000

Accounts receivable                   5,400                  Insurance expense             1,200

Buildings                                      63,000                 Supplies                             1,400

Cash                                               20,600                 Notes payable                   3,300

Service revenue                           25,700                 Rent expense                     3,400

Common stock                            52,000                 Salaries expense               10,000

Retained earnings (beginning)   25,900



accounting financial statements


financial information


financial statement definition


>>> Practice Financial Statement Quiz 1 and Quiz 2.



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Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.

Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.


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