Companies commonly arrange a condensed financial statement along with the customary financial statements. The core groundwork on these documents function to serve various legal commitments and usually associates with an episodic audit.
Nevertheless, except for substituting comprehensive financial statements, condensed financial statements turn out to be the additional documents or precise supplementary papers essential during the auditing procedure.
What Are Condensed Financial Statements?
Condensed financial statements are defined to be the brief version of a business’s income statement, cash flow statement, and balance sheet, all collectively put into a particular financial document.
These brief reports are made to deliver a rapid outline of the business’s financial position with appropriate detail, and usually for internal procedures.
Purpose of A Condensed Financial Statement
A condensed financial statement is made to deliver quick and accurate information about a business’s financial position and a brief look on where the business’s finances stand during that period. The condensed statement also mentions all the variations in the financial position of the business.
Usually, businesses aim on arranging condensed statements all around the year along with the annual financial statements.
Moreover, businesses also require condensed financial statements at times to assist the calculated demonstration of concise data to business associates or likely through the introductory periods of conciliation.
Understanding Condensed Financial Statement
Businesses arrange condensed financial statements during the year in expectancy of their monthly or yearly reports. These are often envisioned to be useful for internal as well as external auditing, except a shareholder or predictor use.
Condensed financial statements show a similar general financial image of the business as any regular financial statements, but in a much concise manner; each item condensed to only one line for briefness.
For example, the condensed financial statement offers only one line for the “total revenue,” while the full financial account will have the revenue by products, services, operating division, interest, and various other sources of revenue.
When inspecting condensed elements of financials, it is important to be more careful while observing each item line. The lesser the data, the simpler the analysis.
However, that same lack of detail can bring in bigger essential complications to the firm. To cross-check the condensed version, a full set of financial statements can be very helpful.
So while reviewing, the full statements will comprise of releases and line items that might have been exempted from the condensed form of the financial statement.
Preparing a Condensed Financial Statement
Financial data with usually several dedicated lines in a full financial statement, only receives a single line to represent that data in the condensed form. Therefore, a representative condensed financial statement normally comprise of one line for expenses, financing income, revenues, cost of goods sold, and net income.
While preparing a condensed financial statement, only relevant pieces of financial data are included. It forms a summary version of the information presented on a complete financial statement with detail.
Condensed financial statements document and calculate assets and liabilities for temporary recording using the financial data available on a year-to-date basis.
Due to practical reasons, the formation of condensed financial accounts usually makes more profit on approximation approaches as related to comprehensive or full financial statements.
A regular set of condensed financial statements would generally include statement of comprehensive income, changes in equity, cash flows, financial position, and particular descriptive notes.
What Is The Use Of Condensed Financial Statements?
Condensed financial statements are an exceedingly accumulated form of the financial statements, with various line items being concise into just a few lines. Using this method, the demonstration of financial data can be simplified, often consolidating all three of the financial statements into a single page.
Example Of Condensed Financial Statement
Below is a condensed financial statement version, presenting a single line dedicated for each item: revenue, expenses, etc.
Overall, the condensed financial statement is used to outline the financial reporting using the least possible content. The aim is to deliver a rapid and brief summary of a business’s financial standing.
Alongside a set of reports, it displays the present “interim” time period and relative “interim” previous period’s financial data (even without being a whole long statement).
Interim periods typically possess particular financial accounts with a comprehensive or condensed form of financial statements dated for less than a fiscal year.