Common financial statements 043-03070000
Expand allThis document outlines and explains what each of the important and most common financial statements are and why each is needed by Services Australia.
Financial statements
All business entities prepare some form of financial statements. The Income Tax Assessment Act (ITAA), section 262A, requires that 'every person carrying on a business shall keep sufficient records of his/her income and expenditure to enable his/her assessable income and allowable deductions to be readily ascertained'.
The records maintained by a business will depend on the nature of the business activity undertaken (for example, sale of goods or provision of services, or a combination of these) and the type of structure within which the business enterprise is conducted (sole trader, partnership, company or trust).
The most common financial statements, completed by most businesses, include:
- income tax returns
- business activity statements (Quarterly for GST)
- profit and loss statement
- balance sheet
- depreciation schedule
- partners' capital accounts (partnerships)
- livestock trading accounts (primary producers)
- cash flow statement
Financial statements are used by the owners of the business for various reasons, for example, to support an application for a loan from a financial institution, or as a record of the performance of the business. Also, while financial statements are no longer required to be lodged with the Australian Taxation Office (ATO) each year, they are still required to be provided to the ATO upon request, for example, if an audit is being conducted.
Reading and understanding business accounting records is important in the correct assessment of the effect of the entity upon customer entitlement under the income and assets tests.
Contents
Balancing adjustment on sale of business assets
Income tax returns (ITRs) and the taxation notice of assessment (NOA)
Related links
Documents required to assess a sole trader business
Documents required to assess a partnership