· Financial Statement is a record of financial position of the person or a firm.
· It provides information about the financial position, performance and changes in financial position of an enterprise.
· Usually it will be prepared at the end of the accounting period.
· Balance sheet, income statement, statement of cash flows, and statement of stockholders' equity are comes under the external financial statements.
· Financial reports to governmental agencies including quarterly and annual reports to the Securities and Exchange Commission (SEC).
Accounting methods refer to the basic rules and guidelines under which businesses keep their financial records and prepare their financial reports. There are two main accounting methods used for record-keeping: the cash basis and the accrual basis.
Income is recorded when it is received, and expenses are reported when they are actually paid. This method is easier than the accrual accounting. This method is appropriate for a small, cash-based business or a small service company.
The accounting method under which revenues are recognized on the income statement when they are earned or incurred. Income is recorded when it is earned rather than when payment is received; expenses are recorded when they are incurred rather than when payment is made.