An introduction to the financial statements The purpose of the three main financial statements is to report the business’s financial performance and position to external users of accounting information. It is important that they only reflect the transactions of the business, and not the transactions of its owner(s). Although the business is accounted for separately to the owner’s personal belongings and transactions, sole traders and partnerships are not regarded as being legally separate from their owners. Companies are different because the business is treated as being legally separate from its owner(s) (who in this case are called shareholders). This means that there are more rules about the preparation of financial statements for companies, and there are also some items (such as ‘share capital’) that only appear in company financial statements. The three main financial statements are the balance sheet (BS), profit a...