These are the variables written/declared in function definition/prototype, and receive their values when a call to that function is made.
The value(s) of the actual parameters are copied to formal parameters when the call to that function is made.
Example:
int sum(int a, int b) //Statement 1
{
return a+b;
}
int main()
{
int x=10,y=20;
int s = sum(x,y); //Statement 2
return 0;
)