What are Financial statements?

Financial statements (Definition)

Financial statements refer to a set of reports that show how a business is performing financially and all business activities related to running the business. These statements are used by accountants to prepare tax reports or government agencies for auditing purposes. This information provides accuracy for tax purposes and allows a business to invest accordingly or seek financing. Financial statements include the balance sheet (which shows assets, liabilities, and equity), income statement (provides revenue and expenses and net income for a set period) and cash flow statement (shows how well a business generates revenue in order to pay operating expenses, fund investments and pay any outstanding debt).