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No matter how big or small a business is, financial reporting and analysis is an essential part for every company. They help in analyzing the financial position of your business. There are three primary financial statements such as Balance Sheet, Income statement, Cash flow statement. This Infographic provides a visual guide of these financial statements and defines the role of each statement in your business.
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Balance Sheets Balance sheet is an overview of a company’s assets and liabilities of the current financial year. Assets= Liabilities + Stockholders’ Equity Asset An asset is something purchased by a company to increase its income and value. It includes current assets & non-current assets. Current Assets Non-current assets It gets converted into cash and cash equivalents. They aren’t converted into cash and cash equivalents and are termed as fixed assets. Liability A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. It includes Current liabilities, Non-current liabilities, and Contingent Liabilities. 01 02 03 Non-Current liabilities Contingent liabilities Current liabilities They aren’t converted into cash and cash equivalents and are termed as fixed assets. These are long-term liabilities, debts, and obligations due in over a year. These liabilities occur according to the outcome of a future event. Stockholders’ Equity Stockholders' equity is the total sum of assets that an investor owns once all the debts and liabilities are paid off. Stockholders’ equity = Total assets – Total liabilities Income Statement Income statement is an essential part of the financial statement. It is also called as profit and loss statement because it shows the company’s profit and loss over a period. A Formula on which an income statement is based: Net Income = Revenue – Expenses Revenue It signifies the money earned from the customers. Revenue may be received as a cash payment or a promise to pay in the future. Expenses Expenses defines as money spent by a company to manufacture products or provide services. It includes labor cost, depreciation or supplies expenses. Net Income A company will calculate the net income using the revenue and expenses recorded during a period. Cash Flow Statement It provides aggregate data of the amount of money that is coming into a business and the amount flowing out. It includes Operating Activities, Investing Activities, and Financial Activities. Operating Activities These activities are related to the daily core business operations. It includes marketing, sales, technology, manufacturing, upgrade, and resource hiring, etc. Investing Activities It includes the cash flows associated with buying or selling plant, property, and equipment, non-current assets, and financial assets. Financial Activities It defines all the transactions of the business, such as paying interest, raising new debts, distributing dividends etc. Analyzing the financial statements is very important for accurate accounting and driving business growth. However, many businesses find this process quite challenging and time-consuming. Thus, hiring a bookkeeping outsourcing company can be an ideal choice to keep your books updated at all times. ACCOUNTINGTOOLS ACCOUNTINGINFO INVESTOPEDIA PROFITBOOKS CLEARTAX BIZFLUENT INVESTINGANSWER