Final accounts – an understanding – Key statements
We introduced you to the three key statements of accounts in the Learning & Development group, in the last post.
The three key statements are :
- The Profit & Loss Account / Income & Expenditure statement
- The Balance Sheet
- The Cash Flow statement
Let us look at each one of them..
The Profit & Loss Account / Income & Expenditure statement:
- This statement is an Income Statement summarizes the results of a firm’s operations for a period of time.
- It communicates how much revenue the company generated during a period and what costs it incurred in connection with generating that revenue.
- Profit or Loss for the Period = (Income for the Period – Expenses for the Period)
The Profit & Loss Account or the Income Statement looks at incoming revenue and outgoing expenses over a period of time. For the Income Statement we use the following terms:
- Revenue – incomings in return for sold goods or services (cash or accounts receivable, for example).
- Expenses – outgoings incurred
- Net Income – the difference between Revenue and Expenses.
The income statement tells you:
• The main & secondary sources of income earned
• The main & secondary sources of expenses / overheads incurred
• Whether or not the organization is operating with a loss or if they are operating with balanced revenues and expenses
More on these next post….