The Main Components in Financial Statements, What Are?

With many types financial statements, then there are also many components of financial statements that you need to know and understand. Studying each component of financial statements will help you understand the function and how to create financial reports for your business.

Components of Financial Statements

As explained earlier, there are several important components that you need to know and understand in order to get a better understanding of financial statements.

Below will be presented the components in the financial statements which are grouped into three, namely the components in the financial statements balance sheet, income statement, and cash flow statement.

balance

In the balance sheet, there are three main components that you need to know, including assets (assets), liabilities (liabilities), and equity (capital).

Asset or property is a resource of economic value owned by the company that is expected to provide benefits to the business. These assets or assets are then further grouped into five types, including the following:

• Accounts receivable
• Supply
• Prepaid expenses
• Tangible assets
• Intangible Assets

Liability is an "obligation" that must be paid by the company with the company's funds or economic resources. Examples of liabilities include trade payables and taxes payable.

Equityor capital is the wealth of a business entity obtained from the reduction of liabilities (liabilities) from assets. Some components that are included in equity are paid-in capital, and profit and loss.

Income statement

The income statement is one type of financial report that is quite routinely made by the company. This type of financial statement has several accounts or components in it. The following is a list of the main components of the income statement:

• Operating revenues, that is income proceeds from the sale of the company's main products.
• Cost of goods sold, namely expenses that are directly or indirectly incurred by the company to produce products.
• Gross profit or loss, namely the difference between operating income and cost of goods sold.
• Operating expenses, namely the expenses of the company's main activities. These operating expenses are divided into two categories, namely selling expenses and general & administrative expenses.
• Business profit or loss, namely the value of the difference between operating income and operating expenses. 

To understand the types of income statements in more depth, you can see the complete information HERE.

Cash flow statement

Contains information on the company's cash inflows and outflows, the cash flow statement also has several components or accounts in it. The components in the cash statement include the following:

• Operation activity account, contains all transactions belonging to the activity operational. 
• Investment activity, contains all transactions related to the sale of fixed assets, purchases of fixed assets, cash receipts from receivables, cash disbursements resulting in increased receivables, and returns cash advance.
• Funding activity account, contains all transactions related to capital and liabilities.

Those are the main components in the balance sheet financial statements, income statements, and cash flow statements. Understanding each of these components will help you understand how to create different types of financial reports, which is important if you want to prepare financial reports for your business.

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