A financial statement template is a part of accounting system and holds very significance, not only in the eyes of management but also for stakeholders. It is prepared by business individuals or financial experts to reflect the financial situation and health of an organization. A financial statement has the competency to outline all the financial activities of a business during a specific time frame. The reason of using a financial statement to release financial information as the benchmark of financial communiqué, which requires an individual or organization to issue it after described time period. In other words, a financial statement is a categorical interpretation which comprehensively portray the actual financial health of an entity.
Importance of Financial Statement
A financial statement can be considered as a summary report which is used to highlight the actual current financial position of a business. Nonetheless, it definitely removes ambiguities regarding financial record as well as describe how an organization has used the funds. Being said that there are three major pillars of a financial statement, without it cannot be considered true. These pillars are also very common and famous and known as; balance sheet, income statement, and cash flow statement. In addition, it is also used to calculate most common financial analysis, financial effects along with quantify procedures of their financial strength. Along these lines, the liquidity and performance of an organization is also covered in a financial statement.
Details of Financial Statement
In simple words, individuals can assume that a financial statement is something which defines financial accounts along with vital information, for instance; current and long-term assets, current and long-term liabilities, net worth value, inflows of cash and outflows of credit values as well. Consequently, a financial statement discloses cash and business transactions and contingency factors, which could reflect positively or negatively once cleared.
Benefits of Financial Statement
As we know that, a financial statement is basically a crucial record, which elaborates the current and accurate picture of the financial activities of an organization. Being very significant for all business organizations, it has many benefits and few of them are given below for your understanding;
1- Financial statements are assisting tools which suggest the management to have a comprehensive grip on all operations of financial activities.
2- The biggest advantage of using these financial statement is to reduce the chances of misusage of monetary funds.
3- These statements are vital while submitting tax related information and other inspections.
4- A financial statement invites investors to make their investment related decisions based on the information provided in these statements.
5- It highlights internal as well as external risk factors along with opportunities. By capitalizing these risks and opportunities, any organization go for expansion and further growth.
6- Preparing and publishing financial statements are also the requirement of different laws, prevailing in various states and countries.