Financial statements are reports that contain and summarize financial and accounting information about a business and that provide information regarding the financial position and performance of an entity throughout a specific accounting period (commonly a calendar year).
More complex financial statements prepared by big corporations may also incorporate supplementary notes and may be subject to an external independent audit to verify their accuracy and fairness of presentation. These notes provide detailed explanations of the accounts and financial information contained in the main reports outlined above.
Financial statements and their supplementary notes are prepared in compliance with accounting frameworks such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). United States’ companies apply GAAP for the preparation of financial statements.
[Last updated in August of 2021 by the Wex Definitions Team]