Financial statements are the reports which tell all about the financial performance and financial position of an entity. Actually, these are the final output of all the accounting transactions entered into an accounting system. Easily, we can say it is the summary report of an accounting system of any entity.
Components of Financial Statements (FS)
There are five components of FS
Financial statements are prepared on a regular basis in order to meet the requirement of Time period principle. According to legislations applicable in many parts of the world, it is mandatory to prepare and issue these statements at least annually. The purpose is to keep outside parties such as shareholders, investors and lenders aware about the financial performance and financial position of the entity.
Interim Financial Statements
However, we seen various companies are exercising practices to issue financial statements on a quarterly and half yearly basis in addition to the annual statements. There is no requirement to include detailed notes and disclosure in the interim reports. So, usually interim reports are prepared in a condensed format to ease out the work load of the accountant and accounts department.