The basic financial statements of businesses include the (1) balance sheet (or statement of financial position), (2) income statement, (3) cash flow statement, (4) the retained earnings statement, and (5) statement of changes in owner's equity. The balance sheet lists all the assets, liabilities, and owner's or stockholders' equity (the difference between assets and liabilities), of a company as of a specific date. Hence, the balance sheet is essentially a still picture of a company's financial position . The income statement, on the other hand, is similar to a moving picture of a company's operations during a given period. The income statement presents a summary of the revenues, gains, expenses, losses, and net income or net loss of an entity for a specific period

The cash flow statement summarizes a business's cash receipts and cash payments relating to its operating, investing, and financing activities during a particular period (see Figure 3). Whereas the income statement reports a company's financial activities on an accrual basis, the cash flow statement reports this information on a cash basis.