Financial Statements
Business: Cambridge International GCSE (2027 Exams), topic 5.3.3
Financial Statements
Financial statements are a formal record of the financial activities and the financial position of a business. Financial statements are produced for legal and tax reasons, as well as for different stakeholders and potential investors. They give an idea of the financial position and performance of a business. There are 3 main financial statements:
Cash flow statement
- The cash flow statement gives an overview of the cash that has come in and out of the business in the past year.
- It also gives the net cash flow, opening cash balance and closing cash balance.
- Example (simplified):
- Opening balance: £5,000
- Cash inflows (sales): £12,000
- Cash outflows (rent, wages, costs): £10,000
- Closing balance: £7,000
Statement of financial (balance sheet)
- This reports the assets, liabilities and equity of a company on a given date.
- It essentially shows what a business owns and what it owes.
- Example (simplified):
- Assets: £50,000
- Liabilities: £20,000
- Equity (owner’s investment): £30,000
Income statement
- An income statement shows a business’ financial performance over a period of time.
- It shows the revenue, costs and profits of a firm.
- Example (simplified):
- Revenue: £100,000
- Costs: £70,000
- Profit: £30,000
Test yourself on Financial Statements
What are the 3 types of financial statements?
Which financial statement mainly works out net profit?
Which financial statement would use net cash flow, opening cash balance and closing cash balance?