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The 3 Financial Statements ๐Ÿ“„ ๐Ÿ“„ ๐Ÿ“„


The 3 Financial Statements

Click the image above to read the complete guide


These 3 financial statements are affected by close to every action taken in your Finance & Accounting department


Let's take a deep dive on each:


๐Ÿ“„ ๐ˆ๐๐‚๐Ž๐Œ๐„ ๐’๐“๐€๐“๐„๐Œ๐„๐๐“ (also known as Profit & Loss)


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


as well as what your company is SPENDING


Here are the major sections (and what they mean):


โšซ REVENUE


What is being earned via sales


โšซ COGS


The cost to deliver your product or service


โšซ GROSS PROFIT


Your profitability in carrying out your product or service (Revenue - COGS)


โšซ OPERATING EXPENSES


All other costs that relate to your core business, but aren't necessary to carry out your product or service (IE not COGS)


โšซ NET OPERATING INCOME


Gross Profit less Operating Expenses


โšซ OTHER INCOME


Money earned that is not core to the business (common ones can be interest income, or cash back from credit cards)


โšซ OTHER EXPENSES


Expenses that are incurred that are not core to the business (common ones can be depreciation and interest expense)



โšซ NET INCOME


Net operating income - other expenses + other income



๐Ÿ“„ ๐๐€๐‹๐€๐๐‚๐„ ๐’๐‡๐„๐„๐“


Here you can see a snapshot of everything the company OWNS...


while also understanding what the company OWES...


and the money put into the business through investments & prior profits


It is separated by 3 sections:


โšซ ASSETS


What the company owns that represents economic value. Common ones are cash, accounts receivable, and prepaid expenses


โšซ LIABILITIES


What the company owes to creditors. Examples can include credit card balances, accounts payable, and deferred revenue


โšซ EQUITY


This is the net value of the company that the owner's can claim, and is typically comprised of amounts invested, and prior earnings (retained earnings)


๐Ÿ“„ ๐’๐“๐€๐“๐„๐Œ๐„๐๐“ ๐Ž๐… ๐‚๐€๐’๐‡ ๐…๐‹๐Ž๐–๐’


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


It is comprised of 3 sections


โšซ CASH FROM OPERATING ACTIVITIES

This section shows all of the cash flows from activities related to operating the business


โšซ CASH FROM INVESTING ACTIVITIES

Here you show the cash movements from long term assets that are purchased that will be depreciated over time.


โšซ CASH FROM FINANCING ACTIVITIES


Here you show the cash from all equity investments and debt injected / paid out from the company


This summary is just a brief overview of these 3 statements

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