Check what you’ve learnt
This week you have learnt the importance of understanding your financial statements. You have learnt that the balance sheet reports what the business owns and/or controls, what it owes and the investment the owner has in the business.
The income statement reflects the Income, cost of goods sold and expenses of the business, showing whether you are making a profit or a loss.
You have also estimated what your Income, cost of goods sold and expenses will be for the next 12 months and how this reflects in the cash inflows and cash outflows.
The cashflow statement shows the inflows and outflows of the business and you have learnt that this can be displayed both as an internal document or an external document that may be required by outside parties for the purpose of borrowing funds.
An important lesson was seeking professional advice, such as the accountant to help you understand your financial reports and the impact of cashflow on your business success.
During this week, Paul has been busy and has created his statement of financial position, income statement and cashflow statement for the three months to 30 September.
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