Can you take the financial statements of your company? Learn here some theory to meet those terms that seem complicated. It is your duty and responsibility to know these issues (although you may have another person in charge of finance) because it’s your business.
Let’s start with the Balance Sheet
This report shows the status of the finances of your company through the property (heritage), rights (assets) and obligations (liabilities) in a given period.
Heritage: It is the capital of your company, i.e. defines participation having the owners or partners in the organization. This is reflected in the resources provided (either money or property) and the results obtained from the operations of the company.
Assets: These are the items on which the company has rights. A good is active when it is under the control of the company. It is expected to contribute to future cash flow.
Liabilities: These are the obligations of the company with third parties such as banks, suppliers, etc…
How do you make a balance sheet?
The methodology to develop the balance sheet of the following equation: Assets = Liabilities + Shareholders
The only balance we must show the accumulated balances of resources that exist at the date and provenance.
The balance sheet is so named because the sum of both sides must match; every transaction has a dual effect on the accounting, since to maintain the balance the two sides of the equation are affected.
Profit and Loss
The statement of profit and loss also known as Income Statement, is the second largest of all financial statements, as it balances on the accounts of income and expenditure of the transactions carried out in a given period of time. It shows with detail if utility or loss was obtained in one accounting period.
The methodology is based on the following equation: Revenue – Expenses = Net Profit or Loss for the year
Once obtained the utility or loss for the accounting period, the information becomes part of the balance sheet and income and expenditure accounts are zero again.
State of changes in equity
It shows the changes that occurred in the last two periods, in the balance sheet. It is always comparative.
Cash Flow Statement
Presents a certain date the origin and use of money generated by the entity.