The balance sheet is a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity, with the basic accounting equation being Assets = Liabilities + Equity. In my experience, the balance sheet is crucial for understanding a company's financial health and stability.
The income statement shows a company's revenues and expenses over a specific period, usually a month, a quarter, or a year. It helps to measure the company's profitability and performance by showing the net income or loss. From what I've seen, the income statement is a vital tool for analyzing trends in revenues, costs, and net income over time.
The statement of cash flows displays the cash inflows and outflows from operating, investing, and financing activities during a specific period. This statement is essential for understanding the liquidity and solvency of a company, as it shows how the company generates and uses its cash resources.
The statement of changes in equity shows the changes in a company's equity during a specific period, including changes due to net income, dividends, and other transactions involving owners. This statement helps investors and stakeholders understand the sources of changes in the company's equity.
These financial statements are interrelated and provide a comprehensive view of a company's financial performance and position. For example, the net income from the income statement impacts the equity section of the balance sheet, and the cash flows from the statement of cash flows impact the cash account on the balance sheet. As an accountant, I always ensure that I thoroughly understand the connections between these statements when analyzing a company's financial situation.