This article was co-authored by Kathy Duong. Kathy Duong is a certified accountant who has been working as an accountant for over 25 years. She received her BS in Finance and Accounting from California State University, Los Angeles in 1992.
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Financial statements are the formal record of a company's financial activity. The main components of a financial statement are the balance sheet, the income statement, and the statement of cash flows. The balance sheet shows the assets, liabilities, and the shareholder's equity at a specific point in time. The income sheet, on the other hand, shows the revenues, expenses, and income or loss for a specific period of time, usually a month, quarter, or year. The statement of cash flows shows the cash balance at the beginning of a period, the inflows and outflows of cash during a specific period, and the ending cash balance. For public companies, what goes on these sheets is regulated by the Securities Exchange Commission in compliance with Generally Accepted Accounting Principles (GAAP) established by the Financial Accounting Standards Board (FASB). You should hire a professional to make sure you are compliant with those standards if you are unfamiliar with them.