These 3 statements are affected by close to every action taken in your Finance & Accounting department
π ππππππ πππππππππ (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 OTHER INCOME – Other Income – Other Expenses
- NET INCOME – Net operating income + other income
π πππππππ πππππ
Here you can see a snapshot of everything the company OWNS (assets). while also understanding what the company OWES to creditors (liabilities). and the money put into the business through investments & prior profits (owners equity)
- 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)
π πππππππππ ππ ππππ π ππππ
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
- CASH FROM FINANCING ACTIVITIES Here you show the cash from all equity investments and debt injected / paid out from the company