The end product of the financial accounting process is a set of reports that are called financial statements. The following generally constitute the financial statements.
1. Profit and Loss Account
2. Balance Sheet
3. Statement of changes in Financial Position
Profit and Loss Account, also known as income statement, presents the results of operations of a business enterprise for a period of time. This statement shows net profit or net income of any entity for a period of time.
Balance Sheet shows the financial position of a business on a certain date. It is also called statement of financial position. Balance sheet indicates the investing and financial activities of a business at a point of time and shows a firm’s assets, liabilities and equity capital usually at the close of the last day of a month or year.
A statement of changes in financial position shows where the financial resources (funds) have come from (sources) and where they have gone (uses).
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