For all those who want to learn something on Accounts

1. INCOME STATEMENT &
BALANCE SHEET

2. What Is Financial
Statement ?

4. Income Statement
Income Statement - It presents financial record of a
company’s revenues and expenses, and profits over a
period of time.
It also gives firm’s financial performance in terms of
revenues, expenses, and profits over a given time
period.
It focus on revenues and costs associated with
revenues.

5. Continue ...
The operating section of an income statement
includes revenue and expenses.
The non-operating section includes revenues and
gains from non-primary business activities also
expenses that are either unusual or infrequent,
finance costs like interest expense, and income
tax expense.

6. Reading an Income Statement
Sales
(-) Cost of goods sold
Gross Profit
Operating Expenses
Operating Income
Interest Expenses
Income Before Tax
(-) Taxes
Net Income Available to Shareholders
+ General & Administrative Expenses
+Selling & Marketing Expenses
+Research & Development Expenses
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

8. Why Income Statement ?
The income statement is one of the major financial
statements used by accountants and business
owners.
It shows the profitability of a company during the time
interval specified in its heading
It helps in identifying Risks and Opportunities &
forecast future performance for :-
Owners
Investors
Creditors
Competitors

9. Usefulness
Evaluate past performance.
Predicting future performance.
Help assess the risk or uncertainty of
achieving future cash flows.

10. Limitations
Companies omit items that cannot be
measured reliably.
Income is affected by the accounting
methods employed.
Income measurement involves judgment.

11. Balance Sheet
A financial statement that summarizes a
company's assets, liabilities and shareholders'
equity at a specific point in time.
The accounting balance sheet is one of the
major financial statements used by accountants
and business owners.
It is also referred to as the statement of
financial position.

12. Components of Balance sheet
Assets – Its anything tangible or intangible which is
owned or leased by a business.
Liability – Its any obligation which a company owes to
another business entity
Owner’s equity - all claims of the proprietor, partners,
or stockholders against the assets of a firm, equal to
the excess of assets over liabilities.
Basic accounting equation - relationship that states
that assets equal liabilities plus owners’ equity.

13. Reading a Balance sheet
Assets
Current Assets
Cash
Accounts receivable
Inventories
Prepaid Expenses
Fixed Assets
Land & Building
Equipments
Investments
Goodwill
Liabilities
Current Liabilities
Accounts payable
Accrued Expenses
IT Payable
Short Term debt
Non Current Liabilities
Bonds Payable
Long Term Borrowings
Owner's Equity
Common Stock
Retained earnings

15. Why Balance sheet
A balance sheet offers a way to look inside your
business and outline what it is really worth. A balance
sheet is different from a measure of profit and loss.
It’s a list of assets and liabilities. Any good balance
sheet includes some basics:
1) What the business owns (real estate, vehicles, office
equipment, etc.)
2) Revenue you expect to take in (accounts receivable)
3) Expenses you expect to pay out (accounts payable)

16. Continue..
The balance sheet is used to assess the value of
your business at any given point
It helps to keep track of finances
It helps for showing it to investors & Bank
Managers
It is also useful for annual accounts too.

17. Formulas

18. Continue...