Blog · Board and management reporting · Finance and FP&A teams
Financial statements describe a company's profit, assets, obligations and cash movements. See the main reports, follow a complete USD example, and check the reconciliations that connect them.
Financial statements report a company's earnings, financial position, cash movements and changes in equity. Read them together: profit does not establish how much cash is available.
The SEC's financial statements definition identifies four main reports: the balance sheet, income statement, cash flow statement and statement of shareholders' equity. Supporting notes provide the accounting context behind the figures.
| Statement | Business question | Measurement |
|---|---|---|
| Income statement | Did operations generate a profit? | Revenue and expenses over a period |
| Balance sheet | What resources and obligations remain? | Assets, liabilities and equity at a date |
| Cash flow statement | Why did cash change? | Operating, investing and financing cash flows over a period |
| Statement of equity | Why did owners' equity change? | Profit, distributions, contributions and other equity movements over a period |
The monthly financial report template provides a connected layout. Historical reports measure completed activity; projected financial statements apply assumptions to future periods.
Use opening and closing trial balances, the period's income-statement export, and cash, debt, fixed-asset and equity movement schedules. Preserve entity, account code, statement line, period, amount and currency on supporting rows.
For this USD example, with no exchange-rate effects or restricted cash, two identities anchor the review:
Assets = Liabilities + Equity
Closing cash = Opening cash + Operating cash flow + Investing cash flow + Financing cash flow
For a simple company without contributions or other equity movements, closing equity also equals opening equity plus net income minus dividends. More complex reports need additional lines for their actual equity movements.
Quarterly revenue sums the quarter's activity; quarter-end receivables are the balance outstanding on that date. The guide to preparing financial statements covers the preparation workflow.
Fictional US wholesaler Cedar Parts closes its quarter on September 30, 2026. All amounts are USD, with no rounding. Expenses in the income statement are positive values to subtract.
| Line | Quarter (USD) | Calculation |
|---|---|---|
| Revenue | 1,200,000 | Sales export |
| Cost of goods sold | 720,000 | Cost export |
| Gross profit | 480,000 | 1,200,000 - 720,000 |
| Cash operating expenses | 240,000 | Expense export |
| Depreciation | 30,000 | Asset schedule |
| Operating income | 210,000 | 480,000 - 240,000 - 30,000 |
| Interest expense | 10,000 | Debt schedule |
| Income before tax | 200,000 | 210,000 - 10,000 |
| Income tax expense | 50,000 | 200,000 x 25% |
| Net income | 150,000 | 200,000 - 50,000 |
The 25% tax expense is an illustrative assumption, not a US statutory rate. The company has no permanent or temporary tax differences in this example.
| Line | June 30 opening (USD) | September 30 closing (USD) |
|---|---|---|
| Cash | 200,000 | 180,000 |
| Accounts receivable | 300,000 | 350,000 |
| Inventory | 400,000 | 420,000 |
| Net property and equipment | 600,000 | 660,000 |
| Total assets | 1,500,000 | 1,610,000 |
| Accounts payable | 250,000 | 270,000 |
| Debt | 450,000 | 410,000 |
| Total liabilities | 700,000 | 680,000 |
| Share capital | 500,000 | 500,000 |
| Retained earnings | 300,000 | 430,000 |
| Total equity | 800,000 | 930,000 |
| Total liabilities and equity | 1,500,000 | 1,610,000 |
The company purchased $90,000 of equipment, repaid $40,000 of debt and paid $20,000 of dividends. There were no disposals, acquisitions, new shares or other equity movements. Net equipment therefore closes at $600,000 plus $90,000 minus $30,000 depreciation, or $660,000.
| Cash flow step | Calculation (USD) | Amount (USD) |
|---|---|---|
| Net income | From income statement | 150,000 |
| Add depreciation | Noncash expense | 30,000 |
| Increase in receivables | -(350,000 - 300,000) | -50,000 |
| Increase in inventory | -(420,000 - 400,000) | -20,000 |
| Increase in payables | 270,000 - 250,000 | 20,000 |
| Operating cash flow | 150,000 + 30,000 - 50,000 - 20,000 + 20,000 | 130,000 |
| Investing cash flow | Equipment purchases | -90,000 |
| Financing cash flow | Debt repayment and dividends: -40,000 - 20,000 | -60,000 |
| Change in cash | 130,000 - 90,000 - 60,000 | -20,000 |
| Closing cash | 200,000 - 20,000 | 180,000 |
All interest and income tax expense was paid during the quarter, with no related accrual changes. The SEC's cash flow explanation describes this reconciliation from net income through noncash items and changes in operating assets and liabilities.
| Equity movement | Retained earnings (USD) | Share capital (USD) | Total equity (USD) |
|---|---|---|---|
| Opening | 300,000 | 500,000 | 800,000 |
| Net income | 150,000 | 0 | 150,000 |
| Dividends | -20,000 | 0 | -20,000 |
| Closing | 430,000 | 500,000 | 930,000 |
Closing assets of $1,610,000 equal liabilities of $680,000 plus equity of $930,000. Closing cash of $180,000 agrees with the cash flow statement. Retained earnings of $430,000 equal $300,000 plus $150,000 profit minus $20,000 dividends.
Those ties establish consistency. Next, investigate why receivables and inventory absorbed cash while the company invested and repaid debt. Compare the movements with collection and purchasing plans before changing spending or financing. A common-size statement helps compare proportions when company size changes.
Bring your statement workbook and supporting movement schedules: Covirage maps the columns, and its tools compute and check the line changes and reconciliations. The external AI model explains the result with every figure traced to its rows. Create a free Covirage account and bring a sample of your own export.
See Covirage for finance teams for the reporting context.
The main statements are the income statement, balance sheet, statement of cash flows and statement of shareholders' equity. Supporting notes explain accounting policies and important balances. Together they show profitability, financial position, cash movements and changes in the owners' interest.
Start with the question. Use the income statement for profitability, the balance sheet for resources and obligations, and the cash flow statement for liquidity. Then check the other reports because profit, available cash and borrowing needs can move in different directions.
Net income includes revenue and expenses recognized before or after their cash settlement, as well as noncash expenses. Cash also changes through equipment purchases, borrowing, debt repayments and distributions. The cash flow statement reconciles those differences.
A balance sheet reports balances at a specific date. An income statement covers a period ending on that date. To explain changes, compare opening and closing balance sheets with the income, cash flow and equity statements for the intervening period.