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However there are three common financial statements which are the income statement, balance sheet and cash flow statement. Business owners use each statement to analyze various pieces of their company’s financial information. Most private companies and small businesses do not need to prepare financial statement, although, if they want to go public, a set of financial statements will come in handy. Furthermore, the preparation of financial statements involves the process of aggregating accounting information into a standardized set of financials, and the completed financial statements are then distributed to management, lenders, creditors and investors, who use them to evaluate the performance, liquidity and cash flows of a business. THE SEQUENCE FOR PREPARING FINANCIAL STATEMENTS Preparing a financial statement is the last step in the accounting cycle before the cycle starts over in a new period, and after the accounts have been adjusted and closed, the financial statements are compiled. It is important to note that financial statements are compiled in a specific order, because information from one statement carries over to the next statement. The trial balance is the first step in the process, followed by the adjusted trial balance and then the financial statement which includes the income statement, the balance sheet and the cash flow statement. .
- THE TRIAL BALANCE
- THE ADJUSTED TRIAL BALANCE
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- THE INCOME STATEMENT
- THE BALANCE SHEET
- CASH FLOW STATEMENT
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