Question

List the four financial statements. Briefly describe each statement.

Short answer

The four financial statements are income statement, statement of retained earnings, balance sheet, andstatement of cash flows.

Step-by-step solution

Explanation on Income Statement

An income statement is one of the financial statementswhich provide details about the profitability of the company for a particular period. It presents the summary of revenues and expenses for the period. In case expenses are higher than revenue, then it results in loss, and if expenses are lower than revenue, then it results in net income.

Explanation on Statement of Retained Earnings

Statement of retained earnings indicates the change in the retained earnings of the company for the period.

Explanation on Balance Sheet

Balance sheet is one of the financial statements which reports the assets, liabilities, and owners’ equity of the business as on a particular date.

Explanation on Statement of Cash Flows

Statement of cash flows reports transactions which involves cash inflows and outflows. Cash transactions are classified into three categories such as operating, investing, and financing activities.