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….

Mohit Gupta