Financial statement is a structured report of the business’s financial activities that shows the financial condition, performance, and liquidity.
What are the components of financial statements?
There are three major components of financial statements: Balance Sheet, Income Statement, and Cash Flow Statement.
Balance Sheet
This is basically the summary of the financial condition of the company. It shows the asset, liabilities, and equity at a particular point in time. In other words, it illustrates your business’s net worth. The asset represents all business ownership, which is further categorized as a current and non-current asset. Current assets are structured in order of liquidity. This includes cash, receivables, inventory prepayment, and other current assets. Current assets are expected to be converted into cash within one year. While non-current asset includes mostly of fixed assets and long-term investments. Consequently, liabilities represent the business obligation arising from past transactions such as credit purchases, accrued expenses, bank loans, bonds, and etc. Liabilities are also classified into current and non-current depending on the maturity of financial obligation. Lastly, the shareholder’s equity represents the claim of shareholders after debts have been repaid.
Income Statement
Income Statement is the most important report of the financial statement. It shows analysis and reports of revenues and expenses for a specific reporting period. It basically shows how much profit the business generated and the amount of expenses incurred while earning revenue. It measures your business performance for specific reporting period.
Cash Flow Statement
Cash flow statement serves as the bridge between the income statement and balance sheet. Since the income statement is prepared under the accrual basis of accounting, there is a difference in the timing of reporting. Revenue and expenses may be both reported in the income statement without actually receiving and paying it in cash. If the business consistently generates more cash from current operations, it indicates its operational effectiveness, where it may use its cash for possible expansion projects or other important matters. Cash flow statement is classified into three sections, namely, operating, investing, and financing activities.
Why should you utilize a ready-made template?
The accounting standards require a specific format of a financial statement depending on the industry. However, for internal purposes, a structured format is enough as long as it serves its purpose. It is often presented in Excel, which shows detailed and systematic calculations of various inputs. Preparing a full set of financial statement can be time-consuming and frustrating. For this reason, downloading a ready-made financial statement template in Excel is a great option.Utilizing templates maintain consistency of outputs and helps streamline the entire process saving you time and stress.
Conclusion: Financial Statement Template best works in Excel
Financial statement requires a series of calculations, which makes Excel as the perfect tool to work with. Financial statement template in Excel is designed to contain tabular format that supports both in-line and summation calculations as well as linkages across all the three-statements so that changes made in one model will automatically change the other.
