If you ever wondered how a company or business is doing financially, how well or profitable it is, or how healthy it is then the Financial Statements is a good place to start.
They show you how well the money of a company or business is managed, where the money came from, how the money was spent and where the money is now.
In a nutshell, they "SHOW YOU THE MONEY!!!"
There are 3 main Financial Statements, let's call them the "BIG 3".
They are:
1. The Balance Sheet
2. The Profit and Loss Statement
3. The Cash Flow Statement
If you recall the 5 Accounting Elements in the earlier posts, the Elements "live" inside these Statements. Think of each of the Statements as a "house" and the Accounting Elements as its "bricks".
1. The Balance Sheet contains ASSETS, LIABILITIES and EQUITY.
2. The Profit and Loss Statement contains REVENUE and EXPENSES.
3. The Cash Flow Statement contains only CASH (which is actually an ASSET).
We'll talk more about each of these statements in detail later on but in the meantime, let's listen to a song called "Money" by Pink Floyd.
Enjoy!!!
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