Types of Financial Statements – Did Sinaumed’s know that every company, both small and large, is required to prepare a financial report?
Yep, this financial report is an important document to show how the financial condition of a company is. In fact, not infrequently, these financial reports will become the main information when evaluating the work of its employees.
In short, through these financial reports, we will be able to find out how much profit and loss is received by the company, whether it is engaged in the service or trade industry. Financial reports, of course, must be prepared according to facts because later they can be used as a guide for calculations in the next period.
A financial report that generally contains profit and loss calculations does not only consist of that one type, but there are many. Yep, these types of financial statements are prepared depending on the needs of each company.
Not infrequently, even a division in the company can make all these types of financial reports if it is needed. So, what are the types of financial reports? What are the objectives of preparing these financial statements? So, so that Sinaumed’s doesn’t feel confused about these questions, let’s look at the following review!
5 Types of Financial Statements in Economics
Before knowing what the types of financial reports are, it is better for Sinaumed’s to understand again what the definition of financial reports is.
According to Kasmir (2013), financial reports are reports that describe how the financial condition of a company is happening now or in the future. This report will later consist of a balance sheet and a profit and loss calculation, especially from the results of the company’s operations with reports related to changes in the company’s equity.
In short, this financial report is a form of conveying information that contains a summary of the process of financial transactions in a company, both in the current and future periods.
Generally, financial reports will be prepared by the accounting division to then be accountable to management and the company. Well, the financial statements are divided into 5 types, namely balance reports, income statements, changes in capital reports, cash flow reports, and notes to financial reports. Here’s the explanation!
1. Balance Sheet
The first type of financial report is the balance sheet. The balance sheet is a financial report that contains the total assets (assets), liabilities (debt), and company capital (equity) at a certain time. The total wealth (assets) will be presented on the assets side, while the amount of liabilities and capital will be presented on the liabilities side. So, the total assets and liabilities must be the same, aka the balance sheet .
The purpose of compiling this balance sheet report is to show how the financial condition of a company is, especially when it is done at the end of the year, aka the book is closed. What’s more, the preparation of this type of balance sheet financial report is based on a standardized form, especially if it is intended for parties outside the company.
For this reason, companies can choose which form of balance sheet report is suitable, with 2 choices, namely the control form and the report form.
Forms of Presentation of Balance Sheet Financial Statements
a) Control Shape (T)
Namely the form of a balance sheet that looks like the letter “T”, so it is often also referred to as the T Form or horizontal. The form is divided into 2 positions, namely the left side contains assets, while the right side contains liabilities and capital.
b) Report Form (L)
Namely the form of the balance sheet which is also called the vertical form. The preparation of this balance sheet starts from the top down, to be precise from the components of current assets (such as cash, banks, securities), components of current liabilities, components of long-term debt and components of capital.
Component Parts of the Balance Sheet Financial Statements
Broadly speaking, a balance sheet financial report must contain the following components.
1) Current Assets
In the form of assets or wealth that can be cashed when needed and a maximum of one year. If the company is in need of money to pay debts that are due, or to purchase goods or services, then the money can be obtained from current assets.
- Cash
- Accounts with banks (both current accounts and savings accounts)
- Time deposit
- Securities
- accounts receivable
- Loans granted
- Supply
- Fees paid in advance
- Income to be received
- other current assets.
2) Fixed Assets
In the form of company assets or assets that can be used for a period of more than one year. These assets are divided into 2 types, namely tangible and intangible.
- Tangible Assets
- Land
- Machine
- Building
- Vehicle
- Accumulated depreciation
- Intangible Assets
- Goodwill
- Copyright
- Licence
- Trademark
3) Other Assets
In the form of assets or assets that cannot be classified as current assets or fixed assets.
- The building is currently under construction.
- Land currently under construction.
- Long term debt.
- Bail.
- Investment advance
2. Profit and Loss Report
The next type of financial report is the Profit and Loss Report. This income statement contains information about the results of operations of the company in a certain period. This report will later describe the amount of revenue received and costs incurred, so that it can be seen whether the company is making a profit or a loss.
In this type of financial report, the amount of income and costs will have a difference when deducted. Well, the difference is what is referred to as profit or loss. If the total revenue is greater than the total costs, then the company is considered to be in a profit condition. However, if the total revenue is less than the total costs, then the company is in a loss condition.
Types of Components of Income Reported
- a) Obtained from the main business of the company.
- b) Obtained from outside the company’s main business (side business).
Types of Expense Components to be Reported
- a) Charged from the main business of the company.
- b) Charged from outside the company’s main business (side business).
Forms of Presentation of Profit and Loss Financial Statements
a) Single Step Model
Namely the form of presentation of the income statement that is not grouped on income and expenses into business groups. It is only separated between revenues and profits, with the costs of existing losses.
b) Multi-Step Model
Namely the form of presenting the profit and loss financial statements which is done by grouping several incomes and expenses that have been arranged in a certain order.
Components in the Profit and Loss Report
Broadly speaking, a profit and loss financial statement must contain the following components.
1) Sales (Revenue)
2) Cost of goods sold (HPP)
3) Gross profit
4) Operating Costs:
- General fees
- Sales fee
- Rental costs
- Administrative costs
- Other operating costs
5) Operating gross profit
6) Depreciation (depreciation)
7) Net operating income
8) Other income
9) Profit before interest and tax or EBIT ( Earning Before Interest and Tax )
10) Interest Fee:
- Money note
- Bank interest
- Mortgage interest
- Bond interest
- Other flowers
11) Profit before tax or EBT ( Earning Before Tax)
12) Taxes
13) Profit after interest and tax or EAIT ( Earning After Interest and Tax )
14) Profit per share ( Earning per Share )
3. Report on Changes in Capital
The third type of financial report is the Statement of Changes in Capital. This report contains the amount and type of capital owned by the company in the current period. Since in a one-year period, it is certain that a company will experience an increase or decrease in capital, this report will also contain an explanation of changes in capital and the reasons for this.
Elements in the Statement of Changes in Capital
In this type of financial report, it is usually calculated by initial capital + (net profit – private) .
a) Initial Capital
Namely the entire fund that will be invested for efforts to progress the company. This capital starts from when the company was founded until a certain time, especially when there has been no additional capital.
b) Net Profit/Loss
Namely the difference between the total income and the total of all expenses, as recorded in the Profit and Loss Report.
c) Private
Namely the withdrawal of a number of capital made by directors or executive parties who invest their capital. Of course, this can be done for personal needs or other needs outside the company’s main business activities.
d) Additional Capital
Namely the difference between net profit and prive.
4. Statement of Cash Flows
The fourth type of financial statement is the Statement of Cash Flows. In this type of financial report, it shows the existence of cash inflows and cash outflows that occur in the company. Cash inflows can be in the form of income or loans made from other parties, while cash outflows can be in the form of costs incurred by the company including payments for company operational costs. This statement of cash flows is prepared for a certain period.
This cash flow statement is usually prepared by comparing the balance at the beginning of the period with the balance at the end of the period, of course, while still using the key items contained in the income statement.
The main function of this type of financial report is as a verification tool ( cross-check ) to obtain answers to questions related to cash. In addition, this cash flow statement can also be used to assess the logical relationship between cash balances in the balance sheet and the profit/loss position in the income statement.
Types of Presentation of Statements of Cash Flows
According to Hackel and Livnat (1996), this type of financial report can be divided into 3 types, namely:
a) Operational Activities ( Operating )
Namely the type of cash flow statement that includes all transactions and other activities that are not included in the company’s investment and financing activities. In short, cash flows from operational activities will definitely include production activities, distribution of goods, and provision of services.
b) Investment Activities ( Investing )
Namely the type of cash flow report which includes purchases and collection of accounts receivable, returns on merchandise inventories, loan payments, to the procurement and sale of company assets in the form of land, buildings, machinery, equipment, and others.
c) Funding or Financing Activities ( Financing )
Namely the type of cash flow statement that includes the acquisition of resources from the owners and the provision of returns on the investments that have been made. In addition, efforts to borrow and repay debts by the owner are also included in this financing activity .
Concept of Presenting a Statement of Cash Flows
According to Munawir (1998), there are 2 presentation concepts in this cash flow statement, namely as follows.
a) Clean Surplus Principle
Namely the presentation concept in which all incidental profit and loss will appear on the income statement and income statement. Later there could be a declaration of dividend payment and profit allowance.
b) Non Clean Surplus Principle
Namely the concept of presenting a cash flow statement that determines the results of the company’s normal operating activities in the current period. Meanwhile, the income statement will incidentally appear on the withheld report.
5. Notes to Financial Statements
The last type of financial report is Notes to Financial Statements. In this type of financial report, it contains information regarding explanations that are deemed necessary for existing financial reports, so that the causes and effects will be clear. The purpose of preparing the notes to these financial statements is so that users can understand the data presented clearly.
In short, this type of financial report must contain explanations that are needed in other financial reports. This is so that interested parties do not misinterpret.
What is the Purpose of Making Financial Reports?
The financial reports which must be prepared by each company are of course not just ordinary reports, but a form of information that has various purposes. So, here is the purpose of making a financial report in the company.
- Being information about the type and amount of assets (assets) owned by the company in the current period.
- It provides information about the type and amount of liabilities and capital owned by the company in the current period.
- As company financial information.
- Provide information about changes that occur to assets, liabilities, and company capital.
- Provides information about the type and amount of liabilities as well as the amount of company revenue earned in a certain period.
- As information about how the performance of the company’s management in a period.
Source:
https://eprints.perbanas.ac.id/1040/4/BAB%20II.pdf (accessed January 2, 2023)
http://eprints.binadarma.ac.id/4556/1/BAB%20II%20%20ANALISA%20%20LAPORAN%20KEUANGAN.pdf (accessed January 2, 2023)
Thahir, Fitria Fauziah. (2008). Evaluation of Financial Performance for the 2001-2007 Period at Perum Peruri Jakarta. University of Indonesia. thesis .
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