In the Business Portal, you could find everything you need to know about the Business Types according to the business purpose.
In the Financials Portal, you could find everything you need to know about the Financial Statements according to the business types.
In the Income Taxes Portal, you could find everything you need to know about the Income Taxes according to the business types.
In the Software Solutions Portal, you could find everything you need to know about the Software Solutions according to the purpose.
If you have any questions, comments or concerns, please contact us. We will be happy to help.
For-profit businesses use four primary types of financial statement: the Balance sheet, the Income
Statement, the Statement of Retained Earnings, and the Statement of Cash Flow.
The Balance Sheet shows the Assets, the
Liabilities and the business Equity. The Balance Sheets is a representation of a the following equation: the Assets are equal to the
Liabilities plus the Equity.
The Income Statement shows the Revenue (Gross Income), the Expenses and the Net Income or
the Net Loss. The Income Statement is a representation of a the following equation: the Revenue (Gross Income) minus the Expenses,
which results in Net Income (if the Revenue is more than the Expenses) or results in New Loss (if the Revenue is less than the
Expenses).
The Statement of Retained Earnings shows the business Begining Equity plus the Net Income or minus the
Net Loss, which results in the business Ending Equity.
The Equity of a Sole Proprietorship is called Owner's Equity. The
Equity of a Partnership is called Partnership's Equity, and the Equity of a Corporation is called Shareholders' Equity.
The Cash Flow Statement is a financial statement that shows how cash entered and exited a company during the accounting period.
Cash coming in and out of a business is referred to as cash flows.
| Balance Sheet | Income Statement | Retained Earnings Statement | Cash Flow Statement |
|---|---|---|---|
| Formula: Assets = Liability + Equity |
Formula: Revenue (Gross Income) - Expenses = Net Income or Net Loss |
Formula: Begining Equity + Net Income or - Net Loss - Dividens (only in Corporation) = Ending Equity (Retained Earnings) |
Formula: Beginning Cash Balance + Cash from Operations + Cash from Investing + Cash from Financing = Ending Cash Balance |
|
Assets increase the business' value or benefit its operations. An asset is something that may generate
cash flow, reduce expenses or improve sales, regardless of whether it's manufacturing equipment or a patent. Assets are
things that the business own or are owed. Liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses. Liabilities refer to things that business owe or have borrowed. Equity is the amount of money that a business' owner has put into it or owns. The difference between its liabilities and assets shows how much equity the business has. |
Revenue is the money generated from normal business operations: services or sales. It is the top
line figure in the Income Statement from which the costs are subtracted to determine net income. Expenses are the costs that businesses incur in running its operations. Expenses include wages, salaries, maintenance, rent, and depreciation. Expenses are deducted from revenue to arrive at profits. Net Income or Net Loss is the bottom line of the Income Statement. When the Expenses are subtracted from the Revenue, the positive result is Net Income, and a negative result is a Net Loss. |
Begining Equity is the Ending Equity (Retained Earnings) of the previous business calendar or
fiscal year. Net Income or Net Loss is the profit or the loss which comes from the bottom line of the Income Statement, it increases the Begining Equity if the amount is positive, and it decreases it if the amount is negative. Retained earnings (Ending Equity) are the amount of profit a business has left over after paying all its direct costs, indirect costs, income taxes, and dividends to shareholders (only in Corporation). When the Equity is negative it is called Retained Deficit. |
Cash from Operations
(+) Net Income
(+) Non-Cash Expenses (e.g. Depreciation & Amortization)
(-) Increase in Net Workiing Capital (operating assets have
grown and/or its operating liabilities have declined) Cash from Investing
(-) Capital Expenditures
(-) Long-Term Investments & Business Acquistions
(+) Divestitures (selling off subsidiary business interests or investments) Cash from Financing
(+) Equity and Debt Issuances
(-) Share Buybacks & Dvidends
(-) Debt Repayments
|
Balance Sheet (example) Assets
Current Assets
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Total Current Assets
Long-term Assets
Property & Equipment
Goodwill
Total Long-term Assets
Total Assets Liabilities
Current Liabilities
Short Term Debt
Accounts Payable
Total Current Liabilities
Long Term Liabilities
Long Term Debt
Total Long Term Liabilities
Total Liabilities
Equity
Equity Capital
Retained Earnings: Ending Balance
Total Equity
Total Liabilities & Equity |
Income Statement (example) Revenue
Less: Direct Costs
Cost of Goods Sold
Direct Labour Salaries
Gross Profit Operational Expenses
Expense 1
Expense 2
Expense 3
Expense 4
Total Operational Expenses Operating Income or Net Loss Plus: Other Income Plus/Less: Gain (Loss) on Financial Instruments Plus/Less: Gain(Loss) on Foreign Currency Less: Interest Expense Less: Interest Expense Income Before Taxes Less: Income Tax Expenses Net Income/Net Loss
|
Statement of Retained Earnings (example) Retained Earnings: Starting Balance Plus/Less: Net Income or Net Loss Less: Dividents (only in Corporation) Retained Earnings: Ending Balance |
Cash Flow Statement (example) Beginning cash balances Cash flows from operations (+) Customer payments
(-) Material purchases
(-) Payroll costs
(+) Other payments
Total cash flows from operations Cash flows from investing
(-) Equipment purchase or (+) sale
(-) Land and vehicle purchase or (+) sale
(-) Intangible asset purchase or (+) sale
Total cash flows from investing Cash flows from financing
(-) Loan payments
(+) Investor funding
(+) Fundraising amount
Total cash flows from financing Ending cash balance
|
If you are planning to apply to a financial institution for a mortgage or a loan, make sure your
documents are in order.
Usually, if you are employed, the lender requires the two most recent paystubs and the previous
year T4 slip: Statement of Remuneration Paid, but some lenders will request two years T1 Income Tax Returns and two years Notice
of Assessment (NOA) instead.
Please keep in mind that If your employer is your corporation, then the lender might also
require the Financial Statements and/or T2 Corporation Income Tax Returns of your corporation for two years.
However,
if you are self-employed, the lender will be looking for a two years T1 Income Tax Returns and two years Notice of Assessment
(NOA).
Sometimes, the income shown on your paystubs, T4s, T1s, NOAs, Financial Statements and T2s might not be enough for
you to be approved for a mortgage or a loan.
If you need help with that, please feel free to contact us, we will be able
to help, so do not hesitate to write us a message under the Contact Us tab.