Financial Statement
Financial statements play a vital role in understanding and managing the financial health of a business. They provide a structured summary of financial performance, position and cash movement, helping business owners, investors and regulators make informed decisions. This guide explains what a financial statement is, the different types of financial statements, what information they include and their overall purpose. It also covers how to read and analyse financial statements, how to create and obtain them and why accurate reporting is essential for compliance, tax obligations and strategic planning. By understanding each component and how they work together, businesses can gain clarity, improve financial management and support long term growth with confidence.
What is a financial statement?
A financial statement is a formal record that summarises the financial activities and position of a business over a specific period. It provides a clear overview of how a business is performing financially and is used by business owners, investors, lenders and regulatory bodies to assess financial health. Financial statements are essential for understanding income, expenses, assets, liabilities and overall profitability.
In Australia, financial statements are commonly prepared in line with accounting standards and are used for tax reporting, business planning and compliance purposes. They help business owners track performance, manage cash flow and make informed decisions. Financial statements also support transparency and accountability by presenting accurate financial information in a structured and reliable format.
Types of financial statement
There are four types of financial statements that work together to provide a complete picture of a business’s financial position and performance. Each statement serves a specific purpose and helps stakeholders understand different aspects of the business finances.
Income Statement
An income statement is a key financial statement that shows a business’s financial performance over a specific period of time. It summarises how much revenue a business has earned and how much it has spent to generate that income. The result is the net profit or net loss for the period which indicates whether the business is operating profitably.
The income statement typically includes revenue cost of goods sold, gross profit operating expenses and net profit. By reviewing this statement business owners and stakeholders can assess profitability, identify trends in income and expenses and evaluate how efficiently the business is being managed. Income statements are widely used for budgeting, forecasting tax reporting and making informed financial decisions.
Balance Sheet
A balance sheet is a financial statement that provides a snapshot of a business’s financial position at a specific point in time. It shows what the business owns, what it owes and the value remaining for the owners. This statement helps assess the overall stability and financial health of a business.
The balance sheet is made up of three main sections: assets, liabilities and equity. Assets include items such as cash inventory equipment and property. Liabilities represent debts and obligations like loans, accounts payable and taxes owed. Equity reflects the owner’s or shareholders’ interest in the business after liabilities are deducted from assets. By reviewing a balance sheet business owners, lenders and investors can understand liquidity solvency and the ability of a business to meet its financial obligations.
Cash Flow Statement
A cash flow statement is a financial statement that shows how cash moves in and out of a business over a specific period. It helps business owners understand where their money comes from and how it is used, which is essential for managing day to day operations and planning for future expenses.
The cash flow statement is divided into three main sections: operating activities, investing activities and financing activities. Operating activities include cash received from customers and cash paid for expenses such as wages, rent and suppliers. Investing activities relate to buying or selling assets like equipment or property. Financing activities show cash movements related to loans, owner contributions and repayments. By reviewing a cash flow statement businesses can assess their ability to generate cash, meet obligations and maintain financial stability.
Statement of Changes in Equity
A statement of changes in equity is a financial statement that explains how a business’s equity has changed over a specific period. Equity represents the owners interest in the business after all liabilities have been deducted from assets. This statement helps users understand movements in ownership value and how profits or losses affect the overall financial position.
The statement of changes in equity typically includes opening equity balances profits or losses for the period owner contributions and withdrawals and any other adjustments that impact equity. It shows how retained earnings grow through profits or reduce through losses and distributions. This statement is especially useful for business owners and investors as it provides a clear view of how equity is built over time and how business decisions influence long term value.
How to Read Financial Statements?
Reading financial statements involves understanding the key reports that show how a business is performing financially. The main financial statements include the income statement, balance sheet, cash flow statement and statement of changes in equity. Start by reviewing the income statement to understand revenue expenses and profit for a specific period. Next look at the balance sheet to see what the business owns and owes and its overall financial position at a point in time. The cash flow statement helps you understand how cash moves in and out of the business and whether it can meet its short term obligations. Finally the statement of changes in equity shows how ownership value has changed over time. When reading financial statements it is important to look for patterns, compare results across periods and understand how the statements connect with each other. This helps business owners, investors and managers gain clarity about performance stability and financial health.
How to Analyse Financial Statements?
Analysing financial statements involves reviewing a business’s financial data to understand performance, profitability and financial stability. This process is commonly known as financial statement analysis and it helps business owners, managers and investors make informed decisions.
The first step in financial statement analysis is comparing figures over time. Reviewing results across different periods helps identify trends such as revenue growth, rising expenses or changes in cash flow. This highlights whether the business is improving or facing financial pressure.
Ratio analysis is another key part of financial statement analysis. Common ratios include profitability ratios, liquidity ratios and solvency ratios. These ratios help assess how efficiently a business operates, how well it can meet short term obligations and its ability to manage long term debt.
It is also important to analyse how the financial statements relate to each other. For example profit shown in the income statement should align with changes in equity and cash movements. Understanding these connections provides a clearer picture of overall financial health.
Effective financial statement analysis supports better budgeting, forecasting, risk management and strategic planning. It allows businesses to identify strengths, address weaknesses and plan for sustainable growth.
How to Create a Financial Statement?
To create a financial statement you need to make sure all financial information is accurate, complete and up to date. The preparation of financial statements starts with gathering your business records such as sales invoices, expense receipts, bank statements and payroll data. These records form the foundation of reliable financial reporting.
The next step is to organise and record transactions in your accounting system. This includes categorising income expenses, assets liabilities and equity correctly. Once records are organised you can prepare key reports such as the income statement, balance sheet and cash flow statement. These documents together show how the business is performing and its financial position at a specific time.
When you make financial statements it is important to review the figures carefully. Check that bank accounts are reconciled, expenses are recorded correctly and any outstanding amounts are included. This ensures the preparation of financial statements reflects a true and fair view of the business.
Many businesses in Australia use accounting software to help prepare financial statements efficiently. Working with an accountant or bookkeeper can also help ensure compliance with accounting standards and tax requirements while providing confidence that your financial statements are accurate and ready for reporting decision making or external use.
How to Get a Financial Statement?
To get a financial statement you first need access to your business financial records. If you manage your own bookkeeping you can generate financial statements directly from your accounting software. Most systems used in Australia such as Xero or MYOB allow you to produce income statements, balance sheets and cash flow statements with a few steps.
If you work with a bookkeeper or accountant they can prepare and provide your financial statements for you. This is common for businesses that want accurate reports for tax lodgement, financing or internal planning. Your adviser will use your recorded transactions, bank reconciliations and supporting documents to prepare compliant financial statements.
You can also get financial statements from lenders or government bodies in specific situations. For example banks will request financial statements when assessing loan applications while the ATO will require them for compliance or review purposes. In all cases it is important to ensure the information is current accurate and prepared in line with Australian accounting requirements.
Purpose of Financial Statements
The purpose of financial statements is to provide a clear and structured view of a business’s financial position and performance. They help business owners understand how the business is performing over a specific period and whether it is operating profitably and sustainably.
Financial statements are used to support informed decision making. Owners and managers rely on them to plan budgets, manage cash flow and assess future growth opportunities. Lenders and investors use financial statements to evaluate financial stability, assess risk and decide whether to provide funding or investment.
They also play an important role in meeting legal and tax obligations in Australia. Financial statements support the preparation of income tax returns, BAS reporting and compliance with Australian accounting standards. Regulators and auditors will review them to ensure accuracy and transparency.
Overall financial statements promote accountability clarity and confidence by presenting reliable financial information that supports business planning compliance and long term success.
Financial Statement Services in Australia
At Juggernaut Advisory in Australia we provide professional financial statements services tailored to the needs of businesses at every stage. Our team prepares accurate and compliant financial statements that give you a clear understanding of your business performance and financial position while meeting Australian regulatory requirements.
We specialise in the preparation of financial statements for tax purposes ensuring your records are structured correctly and aligned with ATO obligations. Alongside this we offer practical business and financial management advice to help you interpret your numbers, improve cash flow and make informed decisions. With Juggernaut Advisory you gain reliable reporting and trusted guidance that supports compliance, confidence and sustainable business growth.