Everything you need to know about the Financial Statements

The 3 financial statements are the backbone to everything in Finance & Accounting

But Finance & Professionals are not the only ones who should understand what they are…

EVERYONE in my opinion should know about the 3 financial statements

Understanding each of them will give you the proper foundation for business as a whole

Let's take a deep dive on each:

📄 𝐈𝐍𝐂𝐎𝐌𝐄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 (also known as Profit & Loss)

This represents everything in terms of what your company is EARNING...

as well as what expenses your company is CONSUMING

It does not care about how much money you have in the bank, who you owe money to, or how the business has been funded

That’s all part of the next financial statement…

📄 𝐁𝐀𝐋𝐀𝐍𝐂𝐄 𝐒𝐇𝐄𝐄𝐓

Most people are familiar with what an income statement is, but are confused as to what a Balance Sheet represents

I like to think of a Balance Sheet as statement that shows the net worth of a the company

Here you can see a snapshot of everything the company OWNS (Assets)

while also understanding what the company OWES (Liabilities),

and the money put into the business through investments & prior profits (Equity)

The balance sheet won’t show you the DETAILS of where you earned your money, and consumed your expenses (like your income statement), but it will show the CUMULATIVE EFFECT of those earnings in a line called “Retained Earnings” (which is connected to the income statement)

📄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 𝐎𝐅 𝐂𝐀𝐒𝐇 𝐅𝐋𝐎𝐖𝐒

This is a popular statement for Finance & Accounting nerds, and business owners - and it’s an important one

This statement shows you all of the details that makes up the movements in your cash balance on the balance sheet.

It’s here you can understand where the movements in your cash went

Many people don’t know, but the statement of cash flows is actually just a report generated from your General Ledger, often times using only the details of your Profit and Loss and Balance Sheet

It doesn’t necessarily provide new information, but rather displays the information in a unique way where you can understand what is happening with your cash

In this guide, I go through the ins and outs of each of these statements, allowing you to get the foundation that you need,