Financial statements (also known as financial reports) describe an organization’s financial resources and what it has done with those resources. Financial statements can be used to show that a clinic is operating within its budget and to serve as a historical basis for preparing future budgets.

Different financial statements are necessary to report different things. For example, one statement may show a short-term loss, while another shows the organization in good financial health overall. This is analogous to an individual losing money in the stock market one year but still having a substantial net worth owing to previous years of savings and investments. Three statements should be prepared at the end of each financial year. The first two also should be prepared periodically during the year to monitor the budget. These statements are (1) a statement of activities, (2) a statement of financial position, and (3) a statement of cash flow.

BACK

NEXT