THE MAIN ACCOUNTING REPORTS

At the end of each accounting period it is the general practice for the Accountant to present the two following types of report in connection with the activities and financial position of the enterprise:

THE REVENUE STATEMENT

This is also called the Operating Statement, or the Profit and Loss Statement (or Account), or the Trading and Profit and Loss Statements (or Accounts).   It lists the sum of the value of transactions over a period. 

The Trading Statement section is a summary of all accounts dealing with the goods and products sold or manufactured by the business.  Thus organizations which do not sell or manufacture goods may not have such a section and may only have a Profit and Loss Statement. 

The Profit and Loss Statement section shows the non direct product related expenses and non trading income of the business entity and how much is left as profit (or loss) for the year after these are taken into account. 

The following is an example of a full Revenue Statement: 

Thus Gross Profit is the difference between the sales value of the goods sold and the casts incurred in obtaining these goods and putting them in a condition ready for sale. 

Thus Net Profit is the final profit derived from all sources for the period after the deduction of all expenses relevant to the period.

THE FINANCIAL STATEMENT

This is also called the Balance Sheet.  It is prepared as at a certain date and lists values as at that date. 

It sets out the assets (what the business owns) and the liabilities (what the business owes). 

The Proprietor (or Owners Funds) in the Balance Sheet is the result of the profits and losses derived over the years of business activity, the amount which the owner/s have contributed to the enterprise in the form of cash or assets both at the commencement of the business and subsequently, and the personal drawings by the owner/s.  Thus it indicates the amount that the business owes to the owner at balance date. 

Current Assets comprise money and other other assets that the business has acquired with the intention of turning into money within the next year. 

Fixed Assets are those assets that the business intends to keep over a number of years and use in operating the business. They change in value only through depreciation, or through obsolescence, replacements, or the purchase of additional assets. 

Investments are assets which are kept to generate income and possible capital gain but are not part of the core trading activity of the enterprise.  If they are of a short-term nature (e.g a temporary arrangement for holding surplus funds before purchasing new assets) they are best included under the heading Current Assets. 

Intangible Assets consist of rights of various sorts e.g. copyrights, patents, trade marks, goodwill. 

Current Liabilities are amounts owed by the enterprise and which fall due within the next year. 

Term Liabilities are amounts owed which are due in a period longer than a year. 

The following is an example of a Balance Sheet: 

Note that the Total Assets and the Total Liabilities should balance.