Generally, external financial statements are prepared on the accrual basis of accounting, which means that assets and liabilities are recorded when they are committed to, and revenue and expenses are recorded when they are incurred (rather than when they are actually paid). A financial statement is a written record that reveals the business activity and the financial performance of a company. Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing or investment purposes. Financial statements included-

* Income Statement

 * Statement of Retained Earnings - also called Statement of Owners ’Equity

* The Balance Sheet

 * The Statement of Cash Flows