Financial statements are those which reveal the financial position of the company at a particular point of time. Financial statements include balance sheet, profit and loss account and cash flow statements. Given below are some of the features or characteristics of financial statements –
- Financial statements are those statements which present historical data, which implies that financial statements reveal what has already happened and they do not tell anything about the future.
- Financial statements are expressed in monetary terms, so profit and loss statements show the profitability of the business, balance sheet reveal the financial position of the company and cash flow statement reveal the cash position or liquidity which is there with the company.
- Financial statements do not reveal the employee satisfaction levels, or effort put by the owner of the company and all other such qualitative factors are excluded from financial statements.
- Financial statements should reveal all things and should not leave out any thing which materially affects the decision of the person who is reading that financial statements and then taking decision regarding the company. For example prospective shareholders will look financial statements before investing into the company.
- Financial statements of the company should be prepared in such a way that they are comparable with the other companies in the same industry or they are comparable with past financial statements of the same company.