What are Condensed Financial Statements?

Condensed financial statements are a highly aggregated version of the financial statements, where most of the line items are summarized into just a few lines. This approach is used to simplify the presentation of information, sometimes into a single page for all three of the financial statements. The footnotes that usually accompany a complete set of financial statements may not be presented when a condensed format is used.

Advantages of Condensed Financial Statements

The main advantages of condensed financial statements are that they have been simplified down to their absolute essentials, making them quite easy to read, and within a very short period of time. This format is especially useful for someone who only wants to understand the essentials of a business, without delving into much detail.

Disadvantages of Condensed Financial Statements

So much information is lost by using the condensed format that it does not present much of an opportunity for financial analysis. This is because there are few line items that can be included in a ratio analysis. Further, the limited presentation of information makes it easier for someone committing fraud to hide the financial impact of his or her actions.

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The Interpretation of Financial Statements

Example of Condensed Financial Statements

A condensed income statement may present a single line item for revenue and a single line item for expenses, while a condensed balance sheet may be restricted to as little as a total amount for assets, liabilities, and equity.