• Business finance includes the procurement of funds and utilization of funds.
• Finance may be defined as the art and science of managing money. It includes financial services and financial instruments.
• Finance also is referred to as the provision of money at the time when it is needed. The finance function is the procurement of funds and their effective utilization in business concerns.
• The concept of finance includes capital, funds, money, and amount. But each word is having unique meaning. Studying and understanding the concept of finance has become an important part of the business concern.

Finance is the life-blood of business. There must be a continuous flow of funds in and out of business. Money makes the wheels of business run smoothly, it is managed efficiently.

Business enterprises require capital for three main purposes.

1. Financial fixed capital requirements such as the purchase of land and building, plant and ‘machinery, furniture, etc.

2. Financing working capital requirements such as the purchase of raw materials, payment of wages and salaries, payment of freight, etc.

3. Financing growth and expansion programs. For providing sufficient capital to the business, several sources of finance have to be tapped. These include shareholders, debenture holders, fixed depositors, banks, and financial institutions.

• The income statement report gives a review of the profitability of a business.
• The income statement provides information about the revenues and expenses flowing into and out of an organization.
• It provides valuable insights into a company's operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers.

The ‘Financial Statement’ covers profit & loss statement and balance sheet.

For a business enterprise, financial statements are relevant financial information presented in a structured manner and in a format that is easy to understand. They typically include three basic financial statements:

1. Statement of financial position: also referred to as a balance sheet, reports on a company's assets, liabilities, and equity at any given point in time.

2. Statement of comprehensive income: also referred to as profit and loss statement (P&L), it is a report on an institution's income, expenses, and profits over a period of time.

3. Statement of cash flows: reports on a company's cash flow activities, particularly operating investing, and financing activities.

Financial statements are tools that provide consistency between businesses, no matter what services they provide.

• Financial statements can be stated as recorded facts as well as it provides a summary of accounts.
• Financial statements are tools that provide consistency between businesses, no matter what services they provide. The nature of financial statements may be understood as follows
• Based on Recorded Facts: Financial statements are based on facts and transactions that are recorded in the books of accounts As, the amounts of Building, Plant and Machinery, Cash in Hand, Cash at the Bank, Sales, and Purchases are all recorded facts and evidence in the books of accounts.
• Based on Accounting Conventions: Financial statements are based on certain essential accounting principles such as valuing inventory at market price or cost price whichever is lower, representing assets in the balance sheet at cost less depreciation, and following the principle of materiality for items of trivial value. The use of accounting conventions makes financial statements comparable, simple and realistic.

• The profit and Loss (P&L) statement is also known as the statement of income.
• Financial statements are tools that provide consistency between businesses, no matter what services they provide.
• Statement of comprehensive income: also referred to as profit and loss statement (P&L), it is a report on an institution's income, expenses, and profits over a period of time.

• The cash flow statement shows the flow of cash and cash equivalents during the financial period.
• The cash flow statement depicts sources of cash inflows and transactions of cash outflows during a period. It is a statement indicating the flow of cash and cash equivalents during a period.
• Statement of cash flows reports of a company shows cash flow activities, particularly operating investing, and financing activities.

The cash flow statement shows cash flows (inflow and outflow) in terms of three components as per accounting standard

(i) operating, (ii) investing, and (iii) financing activities.

• The cash flow statement shows the net increase/ decrease of cash and cash equivalents under each activity individually and collectively. Cash flows from operating activities result from the major revenues producing activities of a business concern.
• The major operating items are cash inflow (cash sales), cash received from debtors, cash proceeds from extraordinary items, royalty, commission, etc.), and cash outflow (cash purchases, cash paid to suppliers and employees, and cash operating expenses, income tax, etc.)

• Subtracting all expenses from revenues yields net profit / net loss.
• The financial statement subtracts expenses from revenues to yield a net income or loss over a specified period of time. Also called an Income Statement.
• An income statement also called a statement of earnings or a profit and loss statement, summarizes the total revenues earned and the total expenses incurred to generate these revenues over a specified period of time.
• The difference between total revenues and total expenses during a given period is referred to as the firm's net income for that period, also commonly referred to as the firm's net earnings or profits.

The balance sheet of a company is required to be prepared in the format given in schedule iii part i.

A BALANCE SHEET statement is prepared on a certain date and this indicates the assets and the liabilities of the business on that date. There is no certain format for sole trading concerns and partnership firms, however, it is based on the liquidity order of the assets and liabilities. The Balance Sheet of these concerns is prepared according to the following orders:

i) On the basis of Liquidity

(ii) On the basis of Permanence

(ii) On a Mixed basis.

Normally a sole trading concern as well as a partnership firm follows the liquidity order. But the Companies Act has laid down the format of the Balance Sheet for a company and a company has to follow it. The formats for the Balance Sheet in Part I of Schedule III of the Companies Act, 2013:

As per Companies Act, the Balance Sheet of a company is required to be presented in vertical form.

The balance sheet is a statement of the financial position of an enterprise on a particular date. It contains properties, possessions, or assets and liabilities of the enterprise, it reflects what does the enterprise own, and how much it owes.

The balance sheet shows what belongs to the enterprise and what the 'claims are on it, the latter represents sources of funds, while the former indicates 'applications' of funds.

Earlier companies were free to present their financial statements either in vertical form or in horizontal form; however, as per the amended Companies Act, only vertical form is permitted.

The format and the rules for presentation are also prescribed. In addition, a company is required that:

(a) its financial statements should present figures for two years, the current year and the immediately preceding year unless it is a new company.

(b) the figures presented should be rounded as:

(i) to the nearest hundreds, thousands or so, if the turnover is less than one hundred crores.
(ii) to the nearest lakh, a million or so in companies having a turnover of one hundred crores or more.