Financial Statements

Financial Statements

Financial Statements

A Financial Statement is a periodic report prepared from the accounting records of a company. Financial statements include the profit and loss statement (or income statement), balance sheet and cash flow statement. Financial statements are usually compiled on a quarterly basis or annual basis.

For reporting convenience, the profit and loss account is divided into:

  • Trading account
  • Profit and Loss account

Financial Statements

The Profit and Loss statement can be further classified into:

  • Gross Profit: Gross Profit is arrived at, after considering the core activi-ties of the company. It is expressed as:

Gross Profit = Net Sales – Cost of Sales

  • Net Profit: Net Profit is arrived at, after considering the other administra-tive costs incurred for the period. It is expressed as:

Net Profit = (Gross Profit + Other Income) – (Selling and Administrative Expenses + Depreciation + Interest + Taxes + Other Expenses)


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