Financial Documents: Definition, Types & Business Examples

Definition

Financial documents, also known as financial statements, are used for reporting financial information about a business, in a standardized format. Standard financial documents include a balance sheet, an income statement, and a cash flow statement.

Balance Sheet

A balance sheet is a snapshot in time of the financial condition of your business. It represents the condition of the business only as of the date it was produced. It's often called a statement of financial position. The balance sheet lists everything that your business owns, known as assets, and everything that your businesses owes, known as liabilities. It also tells you the net worth of your company by subtracting the value of the assets from the total liabilities owed. This net worth is called owner's equity.

The balance sheet is based on the standard accounting equation:

Assets = Liabilities + Equity

When reading any of these statements, a number bounded by parentheses indicates a negative number. This is an example of a balance sheet (see video).

Income Statement

An income statement depicts the revenue and expenses of a business over a particular period of time, such as a month, financial quarter, or year. It is often referred to as a statement of income. It will tell whether you had a net profit for the period or suffered a net loss. This is an example of an income statement (see video).