Financial Statements
Financial Statements – Income Statement, Balance Sheet, Statement of Retained Earnings & Statement of Cash flows
Financial Statements include Income Statement, Balance Sheet, Statement of Retained Earnings and Statement of cash flows. These financial statements present a company or a firm’s financial health position and status. It also presents the performance of the business. These have to be presented in the company’s annual report to be available to the outsiders and the public.
1. Income Statement
It shows the company or a firm’s various revenues, cost of revenues, gross profit, operating expenses, operating income, non-operating income and expenses and net income after taxes. It shows the company’s profit or losses attained during a period and the components of the same.
Example & Format of Income Statement
Income Statement of X Ltd for the year ended 31st Dec….
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Revenue
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$100,000
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Less: Cost of revenue
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$50,000
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Gross Profit
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$50,000
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Operating expenses:
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Rent
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$4,000
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Selling expenses
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$3,000
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Administrative expenses
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$10,000
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Depreciation expenses
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$5,000
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Operating expenses
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$22,000
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Operating Income
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$28,000
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Non-operating expenses
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Interest expenses
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$2,000
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Income before taxes
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$26,000
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Less: Income tax at 35%
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$9,100
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Net Income
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$16,900
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2. Balance Sheet
Balance Sheet shows the assets and liabilities position as on a given date. It also shows the status of the owner’s equity.
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Balance Sheet of X Ltd. as on 31st Dec…..
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Liabilities
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Assets:
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Current Liabilites:
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Current Assets
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Accounts payable
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xxx
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Cash
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xxx
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Notes Payable
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xxx
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Accounts Receivables
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xxx
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Total current
liabilties
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xxxx
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Marketable securities
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xxx
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Long-term liabilities:
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Inventory
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xxx
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Debentures, 8%
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xxxx
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Prepaid expenses
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xxx
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Owner's equity:
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Total current assets
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xxxx
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Common stock
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xxx
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Fixed assets:
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Additional Paid-in Capital
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xxx
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Land
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xxx
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Retained earnings
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xxx
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Buildings
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Total owner's equity
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xxxx
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Less:Accumulated Dep.
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xxx
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Total fixed assets
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xxxx
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Other assets
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xxxx
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Intangible assets
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xxxx
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Total liabilities & Owner's equity
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xxxx
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Total assets
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xxxx
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3. Statement of Retained earnings
This statement shows the changes in the retained earnings of the company over the period. Net profit is added to the opening balance of retained earnings and any dividends paid, subtracted. The result is the closing balance of retained earnings.
4. Statement of Cash flows
This statement shows a report of cash inflows and outflows arising out of operating, investing and financing activities.
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