There are two main financial statements that make up a major part of monthly reporting – the balance sheet, and profit & loss statement (also known as the ‘Income statement’).
The balance sheet reports on:
Assets are future economic benefits owned or controlled by the entity. They include anything owned by the entity that is valuable and contributes to revenue generation, such as cash at the bank, accounts receivable, inventory, land and buildings, and plant and equipment.
Liabilities are amounts owed by the entity to external parties which include bank overdrafts, accounts payable, provision for annual leave and long service leave, tax liabilities and loans payable.
Equity represents the investments made by the owners of the business and the sum of accumulated profits made over the years of operation. When a profit is made, equity increases and vice versa.
Profit and Loss Statement
The profit and loss statement (or income statement) shows the profit or loss for the period. It is usually headed “for the year ended…”. Up until 30 June 2005, the profit and loss statement was also referred to as the statement of financial performance. The profit and loss statement includes:
- Revenues, and
- Expenses of the business for the relevant period.
The difference between revenues and expenses is referred to as the net profit / (loss). Some organisations, particularly non-profit organisations, refer to this figure as the net surplus/(deficit).
Net profit / (loss) is defined as:
Net profit / (loss) = Revenues – Expenses
Revenues are inflows derived by the entity as a result of the sale of goods or provision of services. Revenues typically include sales, interest received, rent received, dividends received, etc. Another term for revenue is income.
Expenses are day-to-day outflows incurred by the business in providing goods or services to customers. Expenses typically include advertising, accounting fees, bank charges, cleaning, electricity, insurance, interest paid, motor vehicle expenses, postage, printing and stationery, rent, salaries and wages, superannuation and telephone.
For advice or more information on monthly reporting, bookkeeping or any business accounting requirements contact the accountants at The Quinn Group now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.
The Quinn Group – Providing the Total Solution
As both a legal and accounting firm The Quinn Group are able to offer business legal and accounting services in one location. Visit our Business Legal Services page to see our range of legal services available to your business.
Visit our Personal Accounting Services page for more information on the wide range of Accounting Services that The Quinn Group can provide to you as an individual.
Contact us here or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.
Whilst we have 5 offices located in Sydney, we are also able to meet you at location convenient for you. Additionally, we have web and teleconferencing available for regional, interstate or international clients.