The 3 Financial Statements 📄 📄 📄

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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:

📄 𝐈𝐍𝐂𝐎𝐌𝐄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 (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):

⚫ REVENUE

What is being earned via sales

⚫ COGS

The cost to deliver your product or service

⚫ GROSS PROFIT

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

⚫ 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)

⚫ NET OPERATING INCOME

Gross Profit less Operating Expenses

⚫ OTHER INCOME

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

⚫ OTHER EXPENSES

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

⚫ NET INCOME

Net operating income - other expenses + other income

📄 𝐁𝐀𝐋𝐀𝐍𝐂𝐄 𝐒𝐇𝐄𝐄𝐓

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:

⚫ ASSETS

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

⚫ LIABILITIES

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

⚫ 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)

📄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 𝐎𝐅 𝐂𝐀𝐒𝐇 𝐅𝐋𝐎𝐖𝐒

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

⚫ CASH FROM OPERATING ACTIVITIES

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

⚫ CASH FROM INVESTING ACTIVITIES

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

⚫ 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