Companies commonly arrange a condensed financial statement along with the customary financial statements. The core groundwork on these documents serves various legal commitments and is usually associated with an episodic audit.
Nevertheless, except for substituting comprehensive financial statements, condensed financial statements turn out to be the additional documents or authentic supplementary papers essential during the auditing procedure.
What Are Condensed Financial Statements?
Condensed financial statements are the brief version of a business’s income statement, cash flow statement, and balance sheet, and all collectively put into a particular financial document.
These brief reports 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 at where the business’s finances stand during that period. The condensed statement also mentions all the variations in a business’s financial position.
Usually, businesses aim to arrange condensed statements all around the year and the annual financial statements.
Moreover, at times, businesses also require condensed financial statements to assist the calculated demonstration of concise data to business associates or likely through the introductory periods of conciliation.
Understanding Condensed Financial Statements
Businesses arrange condensed financial statements during the year, expecting their monthly or yearly reports. These are often envisioned to be useful for internal and external auditing, except for 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 more concise manner; each item is condensed to only one line for briefness.
For example, the condensed financial statement offers only one line for the” “total revenues”,” while the full financial account will have the revenue by products, services, operating divisions, 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 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 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 full financial statements, only receives a single line to represent that data in the condensed form. Therefore, a representative condensed financial statement normally comprises 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 a 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 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 financial statements into a single page.
Example Of Condensed Financial Statement
Below is a condensed financial statement version, presenting a single line dedicated to each item: revenue, expenses, etc.
Overall, the condensed financial statement outlines the financial reporting using the least possible content. The aim is to deliver a rapid and brief summary of the business’s financial standing.
Alongside a set of reports, it displays the present” “inter”m” time period and relative” “inter”m” previouperiod’s’s financial data (even without being a whole long statement).
Interim periods typically possess financial accounts with a comprehensive or condensed form of financial statements dated less than a fiscal year.