The Financial statements are records of income and expenditure, and assets and liabilities of a business firm. Income and expenditure are revenue related transactions. Financial Statements are also known by other names like the Financial Reports. There are two most important Financial statements: 1. * The Balance Sheet, and 2. * The Profit & Loss Statement (or, the Income Statement) Other two important Financial Statements are: the Cash Flow Statement and the Statement of Changes in Shareholders Equity.