ample Income Statements

The income statement (profit and loss statement) shows the revenue, expenses, and net income (or net loss) for a period of t 25% 30% 2012 2013 2014 Revenues 10,00,000 12,50,000 13,00,000 Cost of Sales 0 500,000 5,20,000 400000 Gross Profit 7,50,000 7,80,000 600,000 Accounting Advertising & Promotion Stationary Depreciation rent Consulting Fees Computer equipment software Lease office equipment Legal & Professional Website Maintenance others Total net 6,000 9,000 10,500 0 12,000 10,000 7,500 11,250 13,125 70,000 12,000 0 7,800 11,700 13,650 70,000 12,000 0

130,000 30,000 5,000 50,000 7,500 10,500 280,500 320000

0 37,500 6,250 50,000 9,375 13,125 230,125 589,875

0 39,000 6,500 50,000 9,750 13,650 234,050 545950

A discussion about understanding the income statement is here

Example Balance Sheets

The balance sheet is a statement of financial position that shows total assets = total liabilities + owners' equity. Financial posi 2012 30,00,000 10,00,000 30,000 2013 35,00,000 10,00,000 30,000 2014 25,00,000 10,00,000 30,000

Cash Inventory Prepaid Leases Total Current Assets Fixed Assets Less: Depreciation Net Fixed Assets Total Assets Accounts Payable Long Term Debt Total Liabilities Owner's Equity Paid-in Capital Retained Earnings Total Liabilities & Equity

40,30,000 7,00,000 70,000 6,30,000

45,30,000 630,000 70,000 5,60,000

35,30,000 5,60,000 70,000 4,90,000

46,00,000

50,90,000

40,20,000

0 30,00,000 30,00,000

8,70,125 23,50,000 32,20,125

94,050 21,00,000 2,194,050

12,80,000 3,20,000

12,80,000 589,875

12,80,000 545950

46,00,000

50,90,000

40,20,000

A discussion about understanding the balance sheet is here

Example Cash Flow Statements

Revenue does not necessarily mean receipt of cash, and expense does not automatically imply a cash payment. Net income a Year 1 Operating Profit $94,266 Year 2 $127,219 Year 3 $156,310 Year 4 $187,020 Year 5 $219,438

Add: Depreciation Working Capital Investment Cash From Operations Interest Expense Income Taxes Net Cash Before Debt Pmt Debt Payment Change in Cash

4,916 99,182

4,916 132,135

4,916 161,226

4,916 191,936

4,916 224,354

-68,908 168,090 43,199 17,873

-70,966 203,101 40,274 30,431

14,256 146,970 37,059 41,738

14,968 176,968 33,524 53,724

15,719 208,635 29,639 66,429

107,018 29,471 $77,547

132,396 32,396 $100,000

68,173 35,611 $32,562

89,720 39,145 $50,575

112,567 43,031 $69,536

Cash Reconciliation Beginning Cash Change in Cash Ending Cash $33,150 77,547 $110,697 $110,697 100,000 $210,697 $210,697 32,562 $243,259 $243,259 50,575 $293,834 $293,834 69,536 $363,370

(or net loss) for a period of time. Net income is the amount by which total revenue exceeds total expenses. The resulting profit is added

wners' equity. Financial position refers to the amount of resources (i.e., assets) and the liabilities of the business on a specific date. Owner

cash payment. Net income and net cash flow (cash receipts less cash payments) are different. For example, taking out a bank loan genera

es. The resulting profit is added to the retained earnings account (accumulated earnings of a company since its inception less dividends).

usiness on a specific date. Owners' equity is the residual interest, or the amount of the assets to which the owners have claim because cre

e, taking out a bank loan generates cash, but this cash is not revenue since no merchandise has been sold and no services have been provi

ince its inception less dividends). A net loss reduces the retained earnings account. The projected income statements demonstrate that y

he owners have claim because creditor claims (liabilities) legally come first. Owners' equity in a business derives from two sources: (1) paid

d and no services have been provided. Loan repayments consume cash, but do not reduce income - they are recorded as a reduction to li

me statements demonstrate that your business has the ability to earn profits over time.

derives from two sources: (1) paid-in capital, which is the investment of cash or other assets in the business by the owner or owners; and

y are recorded as a reduction to liabilities. In our income statement example (above), although net income for Year 1 was $33,194, cash fl

ness by the owner or owners; and (2) retained earnings, which are the accumulated profits of the business less the losses and withdrawal

me for Year 1 was $33,194, cash flow was $77, 547. The beginning cash balance in Year 1 was $33,150. Cash flow in Year 1 was $77,547. A

ess less the losses and withdrawals. The purpose of the balance sheet is to report the financial position of a business at a particular point i

Cash flow in Year 1 was $77,547. Add the two, and the ending cash balance in Year 1 becomes $110,697. Your statements "tie together." T

of a business at a particular point in time.

Your statements "tie together." This is a simple check potential investors or lenders will perform.