Guide to Financial Statements & Free Templates

Handling your small business’s finances requires more than just checking your bank account. Business owners rely on financial statements, such as income statements, balance sheets, and cash flow statements, to gain a clear picture of their company’s financial health.

Each financial statement focuses on a specific aspect of your finances – providing valuable insights into profitability, assets, liabilities, and cash flow. While a full set of financial reports tells the complete story, individual reports serve specific purposes, such as external reporting and business planning.

Our financial statement examples and templates will help you take control of your accounting, whether you’re seeking investment or strategising your next business move.

In this article, we’ll provide financial statement examples and explore the following topics:

• What financial statements actually are
• Income statements – tracking your profits and losses
• Balance sheets – seeing what you own and owe
• Cash flow statements – following your money's movement
• How financial statements differ across industries
• Practical ways to use your financial statements
• Tax information you need to know
• How to submit your financial reports digitally
• Free financial report templates to get you started right away

What are financial statements?

Financial statements are structured reports that show how your business is performing financially, laid out in a way that makes sense to banks, investors and the tax office.

Think of financial statements as your business's health reports. They show where your money's coming from, where it's going and how much you've actually got. There are three main types:

• Income Statement: Shows revenue, expenses, and profit over a period
• Balance Sheet: Lists assets, liabilities, and equity at a specific point in time
• Cash Flow Statement: Tracks cash inflows and outflows to show liquidity

Each report tells you something different about your business's financial story.

Australian Financial Reporting Standards (AFRS) 

In Australia, there are rules about how financial statements should be prepared. These rules help to make sure everyone's reports are consistent and trustworthy.

The Australian Accounting Standards Board (AASB) sets the standards for the format of financial statements. Here's what small business owners should know:

• AASB 101: Presentation of Financial Statement: This outlines the structure and minimum requirements for financial statements. Find out more from the Australian Accounting Standards Board.
• AASB 107: Cash Flow Statements: This standard provides guidance on how to track and report your cash flow information. Learn more from the Australian Accounting Standards Board.

Following these standards isn't just about ticking boxes – it makes the format of your financial statement more credible. If you want to stay up-to-date with what's required, the Australian Securities and Investments Commission (ASIC) website has lots of resources: ASIC Financial Reporting. 

Adhering to these financial reporting standards is simple with an accounting solution like QuickBooks. Automated features can generate accurate financial statements and streamline your reporting process.

Income Statements

An income statement – sometimes called a profit and loss statement – shows your business's financial performance over a specific period. This type of financial statement tracks all your revenue sources and expenses and shows whether you're operating at a profit or loss.

Components of an income statement

• Revenue: Money earned from your primary business activities
• Cost of Goods Sold: Direct costs related to producing your products or services
• Gross Profit: Revenue minus cost of goods sold
• Operating Expenses: Day-to-day costs like rent, utilities, and salaries
• Net Income: The bottom line after all expenses are subtracted from revenue

Benefits of an income statement

An income statement helps you identify spending patterns and compare performance across different time periods. It can assist in detecting trends (like rising expenses), comparing performance ("we did better this quarter than last quarter"), and making smarter decisions about spending and pricing.

A per-formatted income statement is one of the most useful financial report templates to have. You can quickly spot areas where you're overspending or performing better than expected – it’s an essential financial overview template for strategic planning.

How to create an income statement 

1) Pick your time period: Decide if you're creating a monthly, quarterly or annual statement. Most small businesses start with monthly to keep a close eye on things.

2) Gather your revenue numbers: Add up all the money your business earned during this period. This includes:

• Sales of products or services
• Rental income (if you rent out property)
• Interest income
• Any other money coming into your business

3) Calculate your cost of goods sold (COGS): This is what it directly costs you to create your products or deliver your services, such as manufacturing and labour costs.

4) Find your gross profit: Simply subtract your COGS from your revenue. This shows how much money you're making from your core business before other expenses.

5) List your operating expenses by category: Group similar expenses together to make them easier to track and analyse. Common categories include:

• Rent and utilities
• Marketing and advertising
• Employee salaries and benefits
• Insurance
• Travel expenses

6) Calculate your operating profit: Subtract your total operating expenses from your gross profit. This shows how much you're making from regular business operations.

7) Add other income and expenses: Include things that aren't part of your core business, like:

• Interest payments on loans (expense)
• One-time equipment sales (income)
• Tax payments (expense)

8) Calculate your net income (bottom line): This final number tells you if you're making a profit or loss after everything is accounted for.

This process doesn’t have to be complicated. By using a financial summary template for your income statements, you can quickly enter your data and have the calculations completed for you.

Income statement template

Download your free income statement template today!

To use this financial summary template to generate an income statement, simply fill out your cost of sales and its subsections, along with your operating costs. You can change the business name and dates, sub-sections, and amounts. The totals will automatically populate, based on the embedded formulas.

QuickBooks financial statement examples and templates make accounting easy – and can be invaluable tools when courting investors or applying for a small business loan.

Balance Sheet

While an income statement shows how your business performed over time, a balance sheet is more like a snapshot of what your business is worth at a specific moment. This format of financial statement is like taking a photo of your business's position on a particular day.

The balance sheet answers questions like: "What do we own?" "What do we owe?" and "What's left for the owners?" 

Your balance sheet is helpful when you need to know if you can pay your bills (liquidity) or if you're carrying too much debt (solvency). Banks and investors require balance sheets because they show your overall financial health at a glance.

The balance sheet equation

Every balance sheet follows one simple rule, called the accounting equation:

Assets = Liabilities + Owner's Equity

The things your business owns (assets) equals the sum of what it owes to others (liabilities) plus what belongs to you (equity).

The key to this equation is that it must always remain balanced. Here's a real-world example: If you borrow $10,000 from the bank to buy business equipment, your assets go up by $10,000 (the equipment), and your liabilities also go up by $10,000 (the loan) – the equation stays balanced. If one side of the equation is out of balance, you need to check your numbers.

Learn more about the accounting equation.

Key components of balance sheets

• Assets: Things your business owns that have value. This includes your cash, equipment, property, money that people owe you (accounts receivable), and inventory.

• Liabilities: What your business owes to others, like loans, unpaid bills, or credit card debt.

• Owner's Equity: What would be left over if you sold all assets and paid all debts. It's essentially the owner's stake in the business.

How to create a balance sheet

Creating a balance sheet for your small business doesn't have to be complicated. Using a financial overview template makes it easy. Here's a step-by-step approach:

1) Choose your balance sheet date: While income statements cover a period of time, a balance sheet shows your financial position on a specific day (usually the last day of the month, quarter or year).

2) Total your assets:

• Current Assets: Things that will turn into cash within a year, like money that customers owe you and inventory you plan to sell.
• Non-current Assets: Longer-term things your business owns, like equipment and investments.

Add these up to calculate your total assets.

3) Calculate your liabilities:

• Current liabilities: Debts you'll pay within a year, such as supplier invoices and credit card balances.

• Non-current liabilities: Longer-term debts, like business loans and equipment leases.

Add these up to find your total liabilities.

4) Calculate owner's equity: This represents the owner's investment in the business plus profits that have been reinvested. It includes capital contributed by owners and retained earnings (profits kept in the business).

5) Check that it balances: Your total assets should equal your total liabilities plus owner's equity. If they don't match, double-check your numbers!

Balance sheet template

Download your free balance sheet template today!

Our example balance sheet will help guide you through the process. You can change the account titles and the amounts listed in the spreadsheet to fit your needs. This format of financial statement allows you to add rows to include new accounts and balances. The total amounts will automatically populate, based on the embedded formulas.

Cash Flow Statement

What is a cash flow statement?

A cash flow statement tracks the actual money moving in and out of your business. While your income statement might show you're running at a profit, your cash flow statement tells you whether you actually have money in the bank to pay your bills.

Think of it this way: your income statement might count a sale when you send an invoice, but your cash flow statement only counts a sale when the customer actually pays you.

Components of a cash flow statement

A cash flow statement categorises transactions into:

• Operating Activities: Revenue and expenses from core business operations
• Investing Activities: Asset purchases or sales
• Financing Activities: Loans, investments or equity changes

Benefits of a cash flow statement

The power of a cash flow statement is in seeing exactly where your cash is coming from and going to. Even profitable businesses fail because they run out of cash – but a cash flow statement can prevent this by giving you an early warning of potential cash shortages.

These useful financial statements allow you to pay special attention to the timing of your cash flows. If most of your customers pay you 30 days after invoicing, but you need to pay suppliers within 14 days, you might need extra cash reserves to cover that gap.

Cash flow statement template

Download your free cash flow template today.

To fill out this financial summary template, enter the applicable values in their respective cells. The total amounts automatically populate based on the embedded formulas. A pre-filled financial statement example is also included to help guide you through the process.

Why are financial statements important?

Financial statements are the backbone of sound business decision-making. They can give you critical insights to help you:

• Make informed business decisions based on accurate financial data
• Secure financing from banks and investors who require comprehensive financial reports
• Track performance over time to identify trends, opportunities, and potential problems
• Ensure compliance with tax authorities and regulatory requirements
• Plan strategically for future growth and expansion

Without proper financial statements, you're essentially operating your business blindfolded. These reports translate complex financial activities into understandable formats. They show your company's true financial health, so you can make the best decisions for the future.

Understanding how financial statements can change by industry

The format of financial statements you use might look quite different depending on what industry you're in. Our financial statement samples can be customised to meet different business needs.

Let's break down some examples:

• Retail: If you're in retail, the format of financial statements you use probably includes detailed inventory sections. You'll want to track seasonal ups and downs in sales, and see how quickly different products are selling. You could use a financial summary report template that highlights things like sales per square meter that other industries don't care about.

• Hospitality: Running a hotel or restaurant? Your financial statements might focus on occupancy rates or table turnover. You'll have sections tracking costs that go up and down with how busy you are, like casual staff wages or food ingredients.
• Construction: Construction businesses often recognise income differently. Instead of recording revenue when a project is finished, the format of financial statements you create might record income as you complete milestones of a project.

• Professional Services: If you're an accountant, lawyer or consultant, your financial statements focus more on billable hours and less on stock take. Your ideal financial overview template would track things like client retention and average project value.
• Manufacturing: Manufacturers need to track production costs. Your financial statements might separate raw materials, partially completed items and finished products ready for sale.

Ways to use your financial statements

Securing financing

Well-prepared financial statements show potential lenders and investors that your business is profitable. Banks typically require at least three years of financial statement examples when considering loan applications, while investors use these documents to calculate potential returns and assess risks.

Strategic planning and budgeting

Your financial statements provide historical data that you can use to create realistic budgets and forecasts. By analysing patterns, you can identify seasonal trends, anticipate cash flow challenges, and plan major purchases.

Performance evaluation and benchmarking

Financial statements allow you to measure your business's performance against industry standards and your own historical data. By comparing metrics from your financial statement sample with industry averages, you can find areas where your business excels or needs improvement.

Tax and compliance considerations

To meet your Australian Tax Office (ATO) obligations, you’ll need to keep accurate financial statements for:

• BAS (Business Activity Statement) Lodgement: Your financial statements provide the figures needed for reporting GST, PAYG instalments, and other tax obligations on your quarterly or monthly BAS.
• GST Reporting: Your financial statements help you keep track of GST throughout the year. No more last-minute scrambling to figure out your GST obligations!
• Annual Tax Returns and Deductions: Well-organised financial statements help you claim every legitimate deduction you're entitled to. They also provide solid evidence if the ATO ever has questions.
• Superannuation and PAYG Withholding:  If you have employees, your financial statements help you track super payments and tax withholding. This keeps you compliant and helps avoid painful penalties.

You can make this easier by using a pre-formatted financial summary template that captures all of the information you need to meet your compliance requirements.

Digital lodgement and reporting of financial statements

Gone are the days of mailing paper forms. Today's Australian businesses have much easier options for submitting financial reports:

• myGov and ATO Business Portal: These online platforms let you lodge your tax returns, BAS statements, and other reports directly with the ATO. The best part? They often pre-fill information they already have, saving you time. Just log in, confirm the details and submit.
• Single Touch Payroll (STP): If you have employees, STP has changed the game. Automated software like QuickBooks instantly reports information to the ATO every time you run payroll.
• Integrated Accounting Software: QuickBooks doesn’t just help you create financial statement templates – it can also lodge reports directly with government agencies. QuickBooks can generate compliant financial statements, check for errors and even help with lodgements. It's like having an accounting assistant working 24/7.

Financial statements template

Get started on the success of your small business today by downloading our free financial statement templates.

The formulas are already built in, so all you have to do is fill in your business and financial information and watch the numbers add up. You’ll be one step closer to understanding the financial health of your company.

Having a handle on your company’s financial statements keeps you informed and guides your business decisions. You’ll be better able to complete those statements when you keep accurate records in Intuit QuickBooks. Join the many Intuit QuickBooks users to help your business thrive!