Financial reports are formal records of a business entity’s or persons financial activities. They show an overview of the entity’s financial position or condition in both the short term and long run. There are four basic financial statements. The four basic ones are; the balance sheet, income statement, the statement of cash flows and the statement of retained earnings.
Financial statements or reports are read by different people. Among them are students, financial analysts, internal and external auditors, shareholders, creditors as well as prospective investors. To incorporate the requirements of all these groups financial statements are thus required to be relevant, reliable, and understandable as well as being comparable. The equity assets and liabilities are closely related to a firm’s financial position while the expenses and income are related to the financial performance of the company at stake.