What is an Annual Account?
Company accounts are a description of the financial performance of an organisation for 12 months. Every year, they are prepared for filing income tax returns and consist of a balance sheet, profit and loss statement, and cash flow statement.
The Balance Sheet
The balance sheet is a financial statement that will provide you with a snapshot of the assets, liabilities, and equity of the owners in your company at a specific time point. It is an indicator of the company’s financial health at the time it created accounts being a measure of what is owned and what is owed.
Profit and Loss Statement
The report of profit and loss varies from the balance sheet because it tracks results over some time, rather than just a snapshot. You can see the net income and overall cost of the company for the financial year in the profit and loss (P&L) statement.
Calculating gross profit is relatively straight forward. The first thing you can see on the P&L is the turnover number; this is your selling amount. This, minus the selling cost from that number, and you’ve got it there!
Cash Flow Statement
The purpose of a cash flow statement is to clarify the movements of cash in and out of the company during the financial year. Cash flow is the sum of money that comes in over some time and goes out of a company. It varies from the profit and loss statement as income is usually reported when the transaction is made, and cash flow is indicated when the money is earned. The two are very different, in that sense.
