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Master the accounting 3 statements learn balance sheets, income statements, and cash flow with our friendly guide., getting the hang of financial statements, what are financial statements.
Financial statements are like the report cards of a business, showing how it’s doing over a certain period. They tell you if a company is making money, paying its bills, and staying in the black ( Yeshiva University ). The big three are:
Each one gives a different piece of the puzzle, but together, they paint a full picture of a company’s financial health ( Investopedia ).
If you’re into accounting or just want to know if a company is worth your time and money, these statements are your best friends. Here’s the lowdown on each:
Income Statement : Think of this as the scorecard for a specific period. It lists all the money coming in (revenue) and going out (expenses). The bottom line? Net income, which tells you if the company is making a profit. Curious for more? Check out our accounting 101 pdf .
Balance Sheet : This one’s like a snapshot of the company’s financial standing at a particular moment. It lists what the company owns (assets), what it owes (liabilities), and what’s left over (equity). Want to see an example? Peek at our accounting balance sheet example .
Cash Flow Statement : This shows where the cash is coming from and where it’s going, covering operations, investments, and financing. It’s all about how well the company handles its cash. Dive deeper with our accounting 3 way match .
When you put these statements together, you get a clear view of how efficiently a company is running, how well it’s managing its assets, and how it’s structuring its capital ( Investopedia ). They’re essential for making smart business decisions and figuring out if a company is on the right track. For more on how these statements fit together, check out our accounting made simple guide.
The balance sheet, also known as the statement of financial position, is a key financial document that shows a company’s assets, liabilities, and shareholders’ equity. It follows the basic formula: assets = liabilities + equity ( Investopedia ).
A balance sheet has three main parts: assets, liabilities, and shareholders’ equity. Each part gives a peek into the company’s financial health.
Assets : These are things the company owns that can bring future benefits. Assets are split into current assets (like cash, accounts receivable, inventory) and non-current assets (like property, equipment, long-term investments).
Liabilities : These are what the company owes. Liabilities are divided into current liabilities (like accounts payable, short-term loans) and non-current liabilities (like long-term debt, deferred tax liabilities).
Shareholders’ Equity : This is what’s left for the owners after all debts are paid. It includes common stock, retained earnings, and additional paid-in capital.
Knowing how assets, liabilities, and equity relate helps you understand a company’s financial standing. The balance sheet must always balance, meaning total assets equal total liabilities plus shareholders’ equity ( Corporate Finance Institute ).
Component | Description | Example |
---|---|---|
What the company owns | Cash, inventory, property | |
What the company owes | Accounts payable, loans | |
Owners’ share after debts | Common stock, retained earnings |
This balance ensures the balance sheet gives a clear picture of the company’s financial status at a specific time, showing its ability to handle short-term and long-term obligations ( Yeshiva University ).
For more details on making and understanding balance sheets, check out our resources on accounting balance sheet example and related topics like accounting 5 principles and accounting 5 types of accounts . These resources can boost your accounting knowledge and offer practical tools for better financial analysis.
The income statement is your go-to financial report for a snapshot of a company’s revenue, expenses, and net income over a set period. Think of it as the report card for a business’s profitability and financial health. Let’s break down the key parts of an income statement: revenue, expenses, and net income.
Revenue, also known as sales or turnover, is the total cash a company rakes in from selling goods or services. It’s the starting point of the income statement. Expenses, on the other hand, are the costs a company incurs to generate that revenue. These expenses can be broken down into several categories:
Here’s a simple table to illustrate:
Category | Amount ($) |
---|---|
Revenue | 100,000 |
Cost of Goods Sold (COGS) | 40,000 |
Gross Profit | 60,000 |
Operating Expenses | 20,000 |
Depreciation & Amortization | 5,000 |
Interest Expenses | 2,000 |
Tax Expenses | 8,000 |
Net Income | 25,000 |
Net income, often called the “bottom line,” is the final figure on the income statement. It’s what you get after subtracting all expenses from total revenue. Net income shows how profitable a company is after covering all its costs.
The formula to calculate net income is:
Using the numbers from the table above:
Understanding the income statement is key to analyzing a company’s profitability and making smart financial decisions. It’s also linked to other financial statements like the balance sheet and the cash flow statement, giving you a full picture of a company’s financial performance. For more on how these statements connect, check out our article on linking income statement to balance sheet .
If you’re keen to boost your accounting knowledge or explore accounting courses part-time , we’ve got plenty of resources for you.
The cash flow statement is like a financial x-ray, showing where a company’s money is coming from and where it’s going. It’s split into three parts: operating activities, investing activities, and financing activities.
This part shows the cash made or spent from the company’s main business. It adjusts net income for non-cash items and changes in working capital, giving a clear view of daily cash flow.
Description | Amount |
---|---|
Net Income | £50,000 |
Depreciation | £5,000 |
Changes in Working Capital | £3,000 |
Cash Flow from Operating Activities | £58,000 |
Here’s how it breaks down:
This section covers cash spent or received from buying or selling long-term assets like equipment or investments.
Description | Amount |
---|---|
Purchase of Equipment | £(10,000) |
Sale of Investments | £7,000 |
Cash Flow from Investing Activities | £(3,000) |
Examples include:
This part deals with cash flows from borrowing or repaying money, and transactions with shareholders.
Description | Amount |
---|---|
Issuance of Shares | £20,000 |
Repayment of Loans | £(15,000) |
Dividends Paid | £(5,000) |
Cash Flow from Financing Activities | £0 |
Key points here are:
The cash flow statement ties in with the balance sheet, giving a full picture of a company’s financial health. For more details, check out our resources like accounting 101 book and accounting handbook and study guide .
Knowing how to read each part of the cash flow statement helps you see if a company can generate cash, invest wisely, and stay financially stable. This is key for judging a company’s performance and making smart financial choices. For more info, take a look at our article on accounting balance sheet example .
Grasping how the three main financial statements tie together is a must for anyone dabbling in accounting or finance. Let’s break down how the income statement, balance sheet, and cash flow statement are all buddies in the financial world.
Your net income from the income statement finds its way to the balance sheet as retained earnings in stockholders’ equity. Retained earnings are basically the company’s piggy bank, showing cumulative profits after accounting for dividends.
Here’s a quick example to make it clear:
Description | Amount |
---|---|
Net Income (Income Statement) | $10,000 |
Prior Period Retained Earnings (Balance Sheet) | $50,000 |
Dividends Issued | $2,000 |
Current Retained Earnings | $58,000 |
So, if you made $10,000 in net income, had $50,000 in retained earnings from before, and paid out $2,000 in dividends, you’d end up with $58,000 in retained earnings on the balance sheet.
The cash flow statement is like the referee, making sure everything balances out. It adjusts net income for non-cash expenses and tracks cash coming in and going out, showing how cash changes over time.
For instance, if you buy new equipment, it bumps up the Property, Plant, and Equipment (PP&E) account on the balance sheet but doesn’t show up on the income statement directly.
Here’s a table to show how different activities link the statements:
Activity | Income Statement | Balance Sheet | Cash Flow Statement |
---|---|---|---|
Net Income | Yes | Retained Earnings | Operating Activities |
Depreciation | Expense | Accumulated Depreciation | Operating Activities (add back) |
Capital Expenditures | No | Increase PP&E | Investing Activities (cash outflow) |
Issuing Dividends | No | Decrease Retained Earnings | Financing Activities (cash outflow) |
Knowing these connections helps you see the big picture of a company’s financial health. For more on financial ratios and evaluating company performance, check out our section on practical applications.
Getting the hang of the accounting 3 statements is a game-changer for anyone diving into accounting and finance. Let’s break down how to use financial ratios and assess company performance with these key statements.
Financial ratios are like the Swiss Army knife for analysts. They help you gauge a company’s performance, efficiency, and financial health. These ratios come from the three main financial statements: the balance sheet, income statement, and cash flow statement. Here are some must-know ratios:
Asset turnover tells you how well a company uses its assets to make sales. Here’s the formula:
[ \text{Asset Turnover} = \frac{\text{Net Sales}}{\text{Average Total Assets}} ]
Company | Net Sales (£) | Average Total Assets (£) | Asset Turnover |
---|---|---|---|
Company A | 500,000 | 250,000 | 2.0 |
Company B | 1,000,000 | 500,000 | 2.0 |
Gross margin shows the percentage of revenue left after covering the cost of goods sold (COGS). The formula is:
[ \text{Gross Margin} = \frac{\text{Net Sales} – \text{COGS}}{\text{Net Sales}} \times 100 ]
Company | Net Sales (£) | COGS (£) | Gross Margin (%) |
---|---|---|---|
Company A | 500,000 | 300,000 | 40% |
Company B | 1,000,000 | 700,000 | 30% |
Operating margin reveals what percentage of revenue remains after paying for production costs like wages and raw materials. Here’s how you calculate it:
[ \text{Operating Margin} = \frac{\text{Operating Income}}{\text{Net Sales}} \times 100 ]
Company | Operating Income (£) | Net Sales (£) | Operating Margin (%) |
---|---|---|---|
Company A | 100,000 | 500,000 | 20% |
Company B | 150,000 | 1,000,000 | 15% |
These ratios give you a peek into different parts of a company’s operations and are crucial for solid financial analysis ( Investopedia ).
To really get a handle on a company’s performance, you need to look at how the financial statements connect to see its profitability, efficiency, and financial stability. Here’s the lowdown:
The income statement is your go-to for checking profitability. It shows how well the company generates revenue and controls expenses. Key figures to watch are gross profit, operating profit, and net income. Ratios like gross margin and operating margin give you a clearer picture of profitability.
Efficiency is all about how well a company uses its assets and manages its liabilities. The balance sheet is your best friend here. Ratios like asset turnover and inventory turnover are super helpful. For example, a high asset turnover ratio means the company is good at using its assets to make sales.
To check financial stability, look at the balance sheet and cash flow statement. Important metrics include the debt-to-equity ratio, current ratio, and cash flow from operating activities. A low debt-to-equity ratio means a healthy capital structure, and positive cash flow from operations shows good liquidity.
For more detailed guides and examples, check out our accounting notebook and accounting 101 pdf .
By using these practical tips, you can get a solid understanding of a company’s financial health and make smart decisions. For more learning, dive into our accounting courses part time and accounting videos .
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Accountancy personal statement example.
The way I think of accounting is that it is a fundamental part of our way of life.
This is because I believe that every person in the world uses the principle of accounting at least once in their lives. It can be things that they do in their daily life, for example, checking how much money they have with them, or how much they have spent; or they use it in businesses and large-scale transactions where it is commonly known.
I am currently studying A-Level Accounts and as I developed an interest in it, I would like to continue studying this subject at university.
I also chose A-Level Business Studies and A-Level Economics because I feel that these subjects complement each other. I also felt that, during revision, it helped me prepare for all my exams.
Business Studies has given me a real insight on how the business world operates and what you need to do to succeed in business. However, Economics has taught me how to analyse and interpret economic data. It made me also develop theories about how people, the companies they run and the economy they live in, behave.
My interest in Accountancy started at an early age. I began part-time work as a sales assistant at Prince Pharmacy two years ago, where I also participated in collecting and processing invoices.
Recently, I've started to work as a part-time receptionist for Al-Hasan Foundation, a charity which helps poor people to receive eye treatment in Iraq.
During my work experience at these two jobs, I developed skills such as sense of responsibility, good teamwork and communication with people and strong leadership.
My main ambition for the future is to become a Chartered Accountant after I finish my degree at university. I am hoping university will provide me with an insight of the accounting world as well as offering me a wide range of choices and connections after my course.
My social life involves myself going out with friends regularly playing football and also tennis, swimming and cricket.
My love for cricket was rewarded when I was part of the successful cricket team of my secondary school, where we finished second in the Under 13's Brent Schools' Cricket Association Tournament.
I'm a keen follower of football and an avid fan of Liverpool Football Club and part of the local branch of their supporters club. I also try to keep up with the world of technology by reading magazines and a number of newspapers.
I actively participate in organizing youth activities such as football tournaments and trips to raise money for well-needy charities. One of these trips included a trip to Najaf (Iraq) to familiarize ourselves with their living standards and to assist in various projects there.
To conclude, I assure you that if given the opportunity, I will prove myself a capable and dedicated student.
I know that I have the right amount of interest in Accountancy as a subject and the potential for success in order to achieve what I want.
Finally, I believe that I have the commitment and the determination to complete this course successfully and fulfill my ambition to become a Chartered Accountant.
This personal statement was written by hadialhakim for application in 2008.
Sun, 25/11/2007 - 20:18
I think it was good, i really belived you had a real passion for accounting. I hope you achieve your goals in life........xx
really helped me with mine!!
Wed, 28/11/2007 - 22:30
Mon, 03/12/2007 - 20:30
Fri, 11/01/2008 - 00:08
This statement shows true dedication and determination. well done
Mon, 14/01/2008 - 11:20
very good statement mashallah!!
Fri, 13/06/2008 - 00:53
simple and straight forward.. gd statement
Mon, 07/07/2008 - 13:48
this is very good beta keep it up, im just trying to get some ideas for my sons personal statement. jeethee raho!
Thu, 11/09/2008 - 14:56
yh dud i think dat is a really goog p/s well don man
I THINK ITS AN INSPIRATION!
Fri, 12/09/2008 - 19:30
im sorry its boring
Thu, 18/09/2008 - 13:53
Fri, 26/09/2008 - 12:20
really good an you support liverpool. it helped me
Mon, 29/09/2008 - 14:50
Really, it's a great personal statement and I'm sure it has impressed the universities which u have applied for.
Thu, 02/10/2008 - 11:06
what universities did u apply for with this statement and if you don't mind which ones did u get accepted to.
very helpful,thnx =]
Tue, 21/10/2008 - 14:28
Wed, 22/10/2008 - 18:18
Mines better.That's why im in Oxford. ;P
wikid statement! wel dun! :D
Thu, 23/10/2008 - 20:28
Thu, 30/10/2008 - 07:20
Good one, simple, straight forward, that's what an accountant should be.
sensational
Tue, 11/11/2008 - 11:45
Fri, 09/01/2009 - 15:24
it is just ok
Thu, 26/11/2009 - 20:49
wow what an amazing personal statement ^_^ you have so much experience. thank you for sharing it...it helped me a lot! :)
Thu, 27/10/2011 - 01:51
i really liked your personal statement..it helped me alot with mine really impressive
Sat, 29/10/2011 - 15:58
Wed, 02/11/2011 - 20:01
sorry i found your statement VERY boring!!!
COMMENTS
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Postgraduate Accounting and Finance Personal Statement Example (Mature Student) 1. Currently, I am a final-year student, studying International Economics and Trade at xxx University. I would like to increase my professional potential in Finance related field by pursuing Master studies at your university...
Personal Statement of Purpose Finance and Accounting MSc. Note: the example personal statement (statement of purpose) below is for guidelines only and to help you understand how to write one - do not copy any part of it. When applying to universities, write your own personal statement (statement of purpose) according to your profile for the ...
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8. Peer Check. After writing the final copy of your personal statement, get it reviewed by your friend, colleague, teacher, supervisor, and subject expert. Be open to critique. Listen to their reviews and comments, ask them what they thought while reading your statement, and then jot down the suggested improvements.
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Postgraduate Accounting and Finance Personal Statement Example (Mature Student) 2. As a senior student at the Management School in Jinan University, one of the oldest key national universities in China, I will graduate in 2010 with a diploma. However, I believe that will not be the end of my academic life. To build up a great career upon my ...
Postgraduate Accounting and Finance Personal Statement Example (Mature Student) 1. Currently, I am a final-year student, studying International Economics and Trade at xxx University. I would like to increase my professional potential in Finance related field by pursuing Master studies at your university. My overall GPA is ranked the upper 20% ...
Accounting and Finance (with a Placement Year) Personal Statement Submitted by Theviya Having an interest in the world of commerce and industry, I believe that studying Accounting and Finance at a higher level will help me to reach my goal of becoming an accountant.
Sample Personal Statement for Graduate School 3. PDF of Sample Graduate School Personal Statement 3 - Public Health. This is my successful personal statement for Columbia's Master's program in Public Health. We'll do a deep dive on this statement paragraph-by-paragraph in the next section, but I'll highlight a couple of things that ...
Accounting personal statements. On this page you'll find a collection of real personal statements written by students applying to study accounting and related courses at university. These personal statements are written by real students - don't expect them all to be perfect!
Personal Statement Brief In your personal statement indicate the reasons you are applying for the MSc Accounting ... motivated to further my education by applying to the Master's in Accounting programme at University College London (UCL). Over the past few years in my Business course, I engaged in a few module that touched on ...
Accounting Personal Statement Example Sample Statement. For all the grand plans played out on the world economic stage, it is the quality of the accounting at individual companies that really makes the difference between success and failure, profit and loss. Often forgotten, rarely credited, I believe that accounts are at the heart of any ...
Accounting and Finance Personal Statement Sample. The global economic crisis has brought into relief the increasing value of financial awareness and skills, to advise bodies from businesses to governments on decision making. I chose to study Business at GCSE in order to delve deeper into business management and structure, wherein I discovered a ...
GCSE Learn to master your GCSEs. General Advice articles on all things uni. Personal Statement Advice on your statement. ... PERSONAL STATEMENT EXAMPLES Accounting personal statements . Discover personal statement examples written by students accepted onto accounting and related courses. Read through the examples to help shape your own personal ...
Degree Course Quiz. Find the ideal university course for you in minutes by taking our degree matchmaker quiz today. Example 8 - Inspire your Accounting and Finance personal statement with our UCAS examples and learn from previous students who have already applied to university.
Postgraduate Accounting and Finance Personal Statement Example (Mature Student) 1. Currently, I am a final-year student, studying International Economics and Trade at xxx University. I would like to increase my professional potential in Finance related field by pursuing Master studies at your university...
Junior accountant personal statement. Here's an example personal statement to guide the creation of your own: James Evans, (BSc) Accounting and Finance. 07654 123456 | [email protected] | Devon 1st September 2022 Smith, Jones & Adams Accountants Dear hiring manager, I'm a (BSC) Accounting and Finance graduate interested in the junior ...
This is a rough draft of my personal statement for a Masters of Accountancy program. Just looking for some thoughts, tips, ideas, etc. The topic is the general "give your background, why you want to be an accountant, why x school, and how it will prepare you". ... how my decision to pursue a Masters in Accounting is a continuation of me carving ...
This personal statement was written by dosso for application in 2013. dosso's Comments. I need your help on letter for master in management and accounting. Ratings. This personal statement is unrated. Related Personal Statements.
This balance ensures the balance sheet gives a clear picture of the company's financial status at a specific time, showing its ability to handle short-term and long-term obligations (Yeshiva University).For more details on making and understanding balance sheets, check out our resources on accounting balance sheet example and related topics like accounting 5 principles and accounting 5 types ...
Accounting and Finance Personal Statement Example 1. It was when I earned my first pound at the age of ten washing my mother's car that I became interested in the power of money. Over time it became clear to me that the people who understand the monetary and banking system are capable of understanding the decisions made by governments and the ...
Accountancy Personal Statement Example. The way I think of accounting is that it is a fundamental part of our way of life. This is because I believe that every person in the world uses the principle of accounting at least once in their lives. It can be things that they do in their daily life, for example, checking how much money they have with ...