9 Questions
What are the four basic financial statements?
What is the purpose of financial statements?
What are consolidated financial statements?
What is the purpose of an audit of financial statements?
What are Generally Accepted Accounting Principles (GAAP)?
What is the purpose of management discussion and analysis (MD&A)?
What are notes to financial statements?
What are International Financial Reporting Standards (IFRS)?
What is the purpose of annual reports?
Summary
Financial Statements: An Overview
- Financial statements are formal records of the financial position and activities of a business, person, or other entity.
- There are four basic financial statements: balance sheet, income statement, statement of changes in equity, and cash flow statement. They are accompanied by a management discussion and analysis.
- Financial statements should be understandable, relevant, reliable, and comparable. They are intended to provide information about an enterprise's financial position, performance, and changes in financial position.
- Consolidated financial statements represent the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as a single economic entity.
- Government financial statements may use accrual accounting, cost accounting, or a combination of both, and have a different chart of accounts than profit-oriented businesses.
- Personal financial statements may be required for personal loans or financial aid.
- Audits of financial statements are usually required for investment, financing, and tax purposes and are performed by independent accountants or auditing firms. Auditors may owe a legal duty of care to shareholders, but liability may be limited.
- Generally Accepted Accounting Principles (GAAP) are used to ensure uniformity and comparability between financial statements prepared by different companies. International Financial Reporting Standards (IFRS) are also used in some countries.
- Annual reports are used to communicate with shareholders and may include a letter from the company's CEO and attractive graphics and photos.
- Notes to financial statements provide additional information on specific items in the statements and support valuations.
- Management discussion and analysis (MD&A) provides a narrative explanation of how an entity has performed in the past, its financial condition, and its future prospects.
- Financial statements are increasingly being created in electronic form, with PDF, HTML, and XBRL being common formats.
Description
Test your knowledge of financial statements with our quiz! Learn about the four basic types of financial statements, their purpose, and how they are used in different contexts such as government and personal finance. Explore Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and find out why audits are important. Challenge yourself with questions on consolidated financial statements, notes, and management discussion and analysis (MD&A). Whether you're a business owner, investor, or just interested in finance, this
