Component of financial statements

 Component of Financial Statements

Component of financial statement includes statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, related notes and disclosures.

1.    Statement of Financial position

First component of financial statement is statement of financial position (Balance sheet). In old days term balance sheet is used because, this statement shows the closing balance of asset & liabilities to be carried to next period, the new name of balance sheet is statement of financial position.

2.    Statement of Comprehensive Income

Second component of financial statement is comprehensive income statement. The is a new name of profit & loss account. This statement shows the performance of the organization. In other words performance of the organization is judged from this statement.

3.    Statement of Cash flows

Third component of financial statement is cash flow statements. This statement shows about the cash inflow & outflows during the year. This statement also helps to predict future cash flows pattern.

4.    Statement in Changes in Equity

Fourth component of financial statement is changes in equity statement. This statement shows the entity transactions with equity holder or impact of transaction on equity. It is important to remember that some transaction are directly charged (treated) in equity account instead of statement of financial position & statement of comprehensive income.

5.    Notes to the Accounts

Fifth component of financial statement is notes or notes to the accounts. Notes shows further explain the figures appearing at the fact of statement of financial position and statement of comprehensive income, statement of cash flow and statement of changes in equity.