Financial statement basics

Income statement

Shows the profit or loss in the period, starting with sales (revenue), and deducting costs, with interim subtotals for operating profits.

Ends with net income from continuing operations.

Balance sheet

Shows assets and liabilities at the end of the period.

Assets have to be reasonably certain they will be realised to be recognised.

Liabilities have to have a probable obligation to be recognised.

Cash flow statement

Shows inflows and outflows of cash over the period (year or year-to-date).

Can be direct (e.g. cash received from customers, less cash paid to suppliers).

Or, can be indirect (e.g. net income translated to operating cash flows by adjusting for non-cash expenses like depreciation, and working capital changes).

Leave a comment

Your email address will not be published. Required fields are marked *