Balance Sheet and Income Statement

Balance sheet summurizes the company and income statement is an accounting document summarizing all the costs and revenues of a company or other body with a commercial activity for a given period, called the accounting year.

This document gives the net result, ie what the company has earned (profit) or loss (loss) during the period, which is in the balance sheet.

Income statement includes

The income statement includes, in the version developed for, intermediate management balances describing how the outcome was built. This document determines :

1- The margin: the sum of sales - the sum of purchases.

 This calculation is useful for companies that sell hardware without the transformer.

2- The value added :  the sum of sales - the sum of purchases and external services (rent, insurance, transportation, etc.)..
This indicator expresses the company's ability to generate a profit from the benefits made to third parties.

3- The operating income: value added - (payroll, taxes and depreciation).
Expresses the firm's ability to generate earnings from its core business.

4- The financial result is calculated as the difference between financial income and expenses.
the exceptional result obtained by the difference between products and charges.

5- The final balance, said net income is the sum of the three previous interim results. It appears both:

 in the income statement, of course, and, in return, the balance sheet, in equity, preceded by a negative sign in case of deficit (sometimes negative sign is replaced by parentheses to issues of presentation).

Balance Sheet

A balance sheet is a document that summarizes what the company (land, buildings ...: Assets) and all its resources (capital, reserves, credits ...: liabilities) at any given moment .

Balance Sheet Accounting

The balance sheet is a snapshot of the company's assets to achieve a business valuation, and specifically whether Restated (eg an asset on the fair value option for the adoption of international standards) and how it applies if it is solvable.

For small business stock is used mainly to third parties (banks, administrations ...) that can monitor whether the company is solvent (by a ratio analysis of cash or in particular) and to assess the taxes due. The annual accounts (including balance sheet, income statement, the annexes ...) must be completed by year end (PCG Article 123.16 in France for companies exceeding € 763,000 in annual turnover for sales of goods or € 230,000 for sales of services).

For large enterprises, it may also be useful to review more than once during the year (4 times a year for example). The assessment forms an inseparable whole with the income and attachments (and other documents according to the following standards) to form the annual accounts. Indeed, the amount of profit found in the balance sheet is always equal to the amount of results found in the income statement. In association with the income statement, balance sheet also provides information on performance and profitability.

 The system should be presented or accessible to stakeholders (owners, suppliers, lenders, tax ...). It is normally a guarantee of transparency for them and must be certified by an auditor for some companies (plcs ...).

There are three purposes to assessment:

• The internal accounting review, detailed generally used by the company for various internal analysis;
• The official balance sheet, auditors for the accounts (auditors and auditors) and shareholders (and more generally to third parties);
• The tax balance sheet, which is used to determine the taxable profit;

 To reduce the administrative cost to companies seeking to converge the accounting and tax balance sheet but it is less possible. The tax planning does not seek in effect to automatically obtain fair representation in the eyes of third of the value and the result of the company. You can read "Sample of balance sheet account reconciliations " and "Financial Balance Sheet" about Balance Sheet and Income Statement.