Chapter 1 ‘Financial statements’
Financial statements
Balance sheet = an overview of the financial situation of a company at a particular moment in time.
Income statement = an overview of the revenue and expenses of a certain period.
Cash flow statement = an overview of the inflow (receipts) and outflows (payments) in cash or by bank of a
certain period.
Balance sheet
Balance sheet
Debit Credit
Non-current assets (fixed assets) Equity (+result income statement)
Any type of fixed assets (car, building, Equity financing (common stock, paid
equipment…) premium / surplus, preferred stock, retained
earnings)
Current assests Non-current liabilities
Inventory (purchase price*amount of goods) Provisions
Receibables Loan (redemption)
Prepaid rent Current liabilities
Cash / Bank (+result net cash flow statement) Trade payables
Interest payables
Bank (when the bank becomes negative)
Total debit 100000 Total credit 100000
Formulas
Assets = equity + libilities
Equity = assets – liabilites (debts)
Equity = original equity +/- profits (loss) + capital injections – capital withdrawals
Profit = revenue – expenses
Inventory end = inventory begin – cost of sales + purchases
Income statement (the moment of actual payment is not relevant)
Incomes statement (expenses and revenues) what cost are made this year?
Sales revenue
Cost of goods sold (cogs)
Gross profit
General expenses
Salaries
Profit / loss of selling investment
Depreciation
Total operating expenses
Earnings before interest and tax (EBIT)
Interest expenses
Income before tax
Income taxes
Net income (profit) Equity
, Cash flow statement
Cash flow statement (cash receipts and cash payments) what is paid this year?
Receipts
Sales
Sales previous periods
Loan
Total receipts
Payments
Payment trade payables
Purchased goods
Rent payment
Dividend payment
Salaries payment
Interest payment
Redemption / loan payment
Payment other investments
Total payments
Net cash flow Cash / Bank balance sheet
Glossary
Fixed assets / non-current assets = These types of assets can be used more than once.
Current assets = These types of assets can only be used once, for example you can only spend € 1 one time.
Equity = The amount of money that the owners have invested in the company
Non-current liabilities = Long term financial obligations of the company to others.
Current liabilities = Short term obligations, where short in essence means shorter than one year.
Equilibrium = A key characteristic of the balance sheet is that the debit side is always equal to the credit
side. In other words, the company has as many assets as it has sources of financing.
Revenue = monetary value of goods and services sold
Expensses = monetary value of production means used
Receipts = all the money that flows into the firm over a certain period
Payment = all the money that flows out of the firm over a certain period (a cash transaction, only drain on
your resources)
Investment = asset that is acquired with the goal of generating income, it holds value
Operating activities = cash flow that are directly related to earning income
Investment activites = include cash flows related to the acquisition or sale of the company’s productive
assets
Finacing activities = cash flows that are directly related to the financing of the enterprise itself
Notes
Cost always influences equity
Equity is not cash. It represents the investment the owner have made in the business.
When making profit equity increases
When paying for an expenses cash decreases
Equity can increase for 2 reasons:
o Direct investment by the owner
o Reinvesting / keeping profit in the business
Equity can decrease for 2 reasons:
o Direct withdrawal by the owner
o Negative profit (loss)
Depreciation expense is never a payment
Financial statements
Balance sheet = an overview of the financial situation of a company at a particular moment in time.
Income statement = an overview of the revenue and expenses of a certain period.
Cash flow statement = an overview of the inflow (receipts) and outflows (payments) in cash or by bank of a
certain period.
Balance sheet
Balance sheet
Debit Credit
Non-current assets (fixed assets) Equity (+result income statement)
Any type of fixed assets (car, building, Equity financing (common stock, paid
equipment…) premium / surplus, preferred stock, retained
earnings)
Current assests Non-current liabilities
Inventory (purchase price*amount of goods) Provisions
Receibables Loan (redemption)
Prepaid rent Current liabilities
Cash / Bank (+result net cash flow statement) Trade payables
Interest payables
Bank (when the bank becomes negative)
Total debit 100000 Total credit 100000
Formulas
Assets = equity + libilities
Equity = assets – liabilites (debts)
Equity = original equity +/- profits (loss) + capital injections – capital withdrawals
Profit = revenue – expenses
Inventory end = inventory begin – cost of sales + purchases
Income statement (the moment of actual payment is not relevant)
Incomes statement (expenses and revenues) what cost are made this year?
Sales revenue
Cost of goods sold (cogs)
Gross profit
General expenses
Salaries
Profit / loss of selling investment
Depreciation
Total operating expenses
Earnings before interest and tax (EBIT)
Interest expenses
Income before tax
Income taxes
Net income (profit) Equity
, Cash flow statement
Cash flow statement (cash receipts and cash payments) what is paid this year?
Receipts
Sales
Sales previous periods
Loan
Total receipts
Payments
Payment trade payables
Purchased goods
Rent payment
Dividend payment
Salaries payment
Interest payment
Redemption / loan payment
Payment other investments
Total payments
Net cash flow Cash / Bank balance sheet
Glossary
Fixed assets / non-current assets = These types of assets can be used more than once.
Current assets = These types of assets can only be used once, for example you can only spend € 1 one time.
Equity = The amount of money that the owners have invested in the company
Non-current liabilities = Long term financial obligations of the company to others.
Current liabilities = Short term obligations, where short in essence means shorter than one year.
Equilibrium = A key characteristic of the balance sheet is that the debit side is always equal to the credit
side. In other words, the company has as many assets as it has sources of financing.
Revenue = monetary value of goods and services sold
Expensses = monetary value of production means used
Receipts = all the money that flows into the firm over a certain period
Payment = all the money that flows out of the firm over a certain period (a cash transaction, only drain on
your resources)
Investment = asset that is acquired with the goal of generating income, it holds value
Operating activities = cash flow that are directly related to earning income
Investment activites = include cash flows related to the acquisition or sale of the company’s productive
assets
Finacing activities = cash flows that are directly related to the financing of the enterprise itself
Notes
Cost always influences equity
Equity is not cash. It represents the investment the owner have made in the business.
When making profit equity increases
When paying for an expenses cash decreases
Equity can increase for 2 reasons:
o Direct investment by the owner
o Reinvesting / keeping profit in the business
Equity can decrease for 2 reasons:
o Direct withdrawal by the owner
o Negative profit (loss)
Depreciation expense is never a payment
