Financial Statements
Definition
Financial statements are reports that summarize the business's financial activity. The three main statements are the Profit & Loss, Balance Sheet, and Statement of Cash Flows.
Example
At month-end, the bookkeeper produces a P&L showing profit for the month, a Balance Sheet showing assets and liabilities, and a Statement of Cash Flows showing how cash changed.
Why It Matters
Financial statements are how the business owner, lenders, and accountants understand the business. They are the output of all the bookkeeping work.