Fill in your details below and one of our friendly consultants will call you back as soon as possible.
  • This field is for validation purposes and should be left unchanged.

Follow us on Twitter

  • #AwesomeAccounting - Always keep your eyes on your costs! Frugal businesses are profitable businesses. https://t.co/BuVzZ68fsK 3 hours ago
  • #FridayFun - What's the one thing you can't do without during your work day? #lovecoffee https://t.co/JZPYsR1Z8n 6 hours ago
  • RT  @ProcessMechanic : When start/started your business, did you take into account the sort of lifestyle you want to live alongside growing y… 16 hours ago
  • RT  @uctgsbsolutions : "The Solution Space Philippi hub is the first community hub to be established by UCT in its 178-year existence." - Pro… 1 day ago
  • #AwesomeAccounting - We're 20 days into #taxseason2017, read our blog ➡️https://t.co/ApsUOQDHU5 & get prepared 🤓 https://t.co/IliEeVuL7n 1 day ago
  • #ThursdayThoughts - There is only 1 way to get ahead in life - add an action component to your dreams! https://t.co/GBKze09hJR 1 day ago
  • RT  @Seedstars : Deadline EXTENDED: FinTech Startups can still submit an application for  @bbva  Open Talent 2017 till FRIDAY:#FinTech https://… 2 days ago
  • RT  @ABANAngels : Why African entrepreneurs need to think bigger  @GuardianNigeria  https://t.co/m8N5HPTKJu 2 days ago
  • RT  @TyronneNel : Have to agree,  @Phezulu_Group  is a focused #SME accounting solution- check them out https://t.co/ykjTbw2Lu4 2 days ago
  • #AwesomeAccounting - Affordable monthly business management & accounting services 4 SME's are not a myth -… https://t.co/uNjzCbaZje 2 days ago
  • #WednesdayWisdom - If it's important you'll make time to do it, if not you'll make excuses! So, what is it....... https://t.co/7Xtupl8W0k 2 days ago
  • #TuesdayTip - Remain curious, remain passionate - it's what creates a great #entrepreneur. https://t.co/hwxlALhbn0 3 days ago
  • RT  @HeadHonchoSA : INTERN WANTED 📣 Our  @6th_Ave_Group  fam are in need of an intern! If the requirements best describes you, drop them a mail… 4 days ago
  • #AwesomeAccounting - #entrepreneurs personal tax is linked 2 the companies they own, appoint somebody who understa… https://t.co/AiE2afYZFo 4 days ago
  • Well done  @Edge_Growth  a really positive development in your history https://t.co/CY04LsyIE2 4 days ago
  • #AwesomeAccounting - Didn't realise that affordable business management & accounting still existed? chat to… https://t.co/jRcJ6FT1t3 4 days ago
  • #MondayMotivation - For #entrepreneurs it's our passion that gets us up, but it's the coffee that keeps us going 😉 https://t.co/0J18wylYln 4 days ago
  • RT  @YALI_SAfrica : "Have an accountability partnership as an entrepreneur "  @AwethuProject  5 days ago
  •  @FMFSouthAfrica  Government's role is to improve efficiencies in the services it provides & then to reduce these ser… https://t.co/EEwFhv217B 5 days ago
  • RT  @FMFSouthAfrica : Rand: The government was set to protect man from criminals; the Constitution was written to protect man from government 5 days ago
 In News

You dont need to be an accountant to understant your income statementOne of the most common responses we encounter during meetings with clients is, “Sorry! I’m not an accountant, so I don’t know a thing about my Income Statement or Balance Sheet!” Well, here is the good news, you DON’T need to be an accountant to understand them.

As you saw from our previous blog there is no mystery around accounting terms like DEBTORS, CREDITORS, CASH FLOW, AGE ANALYSIS, etc. and your INCOME STATEMENT and BALANCE SHEET are no different.

Put very simply, your Income Statement (as the name implies), tells you what your income is for a particular month or year. Essentially it is a record of all your Sales less all your Expenses for that particular month or year.

The reason this is important, is every business needs to know if it is making a Profit (good) or a Loss (bad). The knowledge of either position is incredibly valuable when planning your businesses future.

Your Balance Sheet (once again as the name implies) reflects the balances owing either by your business or to your business for a particular month or year. Essentially it is a record of your businesses wealth, your Assets (good) less your Liabilities (bad).

The reason this is important, is every business needs to know if its Assets exceed its Liabilities. Should your business assets not exceed its liabilities, it is Insolvent and you may not trade if your business is insolvent!

The reason we look at them together is that they are interrelated. Essentially all the sales (debtors) for a particular month or year are recorded on your income statement and those clients who have not yet paid are recorded on the balance sheet as assets.

The same applies to your expenses, all expenses (creditors) for a particular month or year are recorded on your income statement and those accounts that you have not yet paid are recorded on the balance sheet as a liability.

Your profit or loss is also recorded on your balance sheet thereby putting together a comprehensive picture of your businesses health.

Your Income Statement and Balance Sheet makes up your management accounts and together they are a very powerful tool in assisting you to manage your business as all the important information you will require is in one easy to find place.

Now that we have covered the framework of what makes up your books of account, next time we will look at what you can claim as income and more importantly what are expenses……

 

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Website’ type=’url’/][contact-field label=’Comment’ type=’textarea’ required=’1’/][/contact-form]
Recent Posts

Leave a Comment

Start typing and press Enter to search