Finance, accounting and money will not be a foreign term if you are someone that is heavily engaged in the business world. In facts, finance is what runs a business. It determines how strong a firm is financially and how it can get up among the other players in the market. In order to compare and contrast such details, the company must have certain financial records that help them do so. This is where financial reports come into light. They usually give an overall summary of the company’s financial position or health. Following are those elements that elements of the report.
Assets and liabilities
These are the things that have a future value, which is also owned by the company and has fully control over. These could large physical facilities like factories, plants, machinery etc. Not only that, but also the financial assets like receivable accounts can also be put under this category when preparing the statement of financial position for a given period of time. Liabilities of an organization depict the company’s obligations that they hold towards other individuals or companies. For instance, payable taxes, accounts and pensions can be put under this category.
Equity in simple terms is what the company would be left with if they sold all of their assets and paid back all of the obligations or what they owe to different parties using the proceedings that came along from the sale. This is what all of the shareholders of the company have invested as well as the profits earned and the losses incurred by the company as well.
Revenue and expenses
The operational cash inflows of a company are usually listed under the revenues section of a company’s financial records. However, this does not include what the company earns through sale of assets and only what they gain through selling the goods and services produced. Similarly, expenses refer to the operational cash outflows of the company. Some overhead expenses like rent are also included in this section. However the most commonly known operational expenses can be recognized as salaries, shipping, material costs etc.
Profit or loss
This is one of the key elements of a financial statement and helps determine the exact position that the company is in, in terms of financial health. The profit will be able to determine how well the company has performed in the market at a given period of time, while ensuring a stable position among the customers. It is important that a company maintains such records in order to ensure further improvement for the company’s future.