We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- The financial statement provides information and conveys the financial position of the company.
- A complete set of financial statements include the Profit & Loss Account, Balance Sheet and Cash Flow Statement.
- A fundamental Analyst is a financial statement user, and he needs to know what the maker of the financial statements states.
- The profit and loss statement gives the company’s profitability for the year under consideration.
- The P&L statement is an estimate, as the company can revise the numbers later. Also, by default, companies publish data for the current year and the previous year, side by side.
- The revenue side of the P&L is also called the top line of the company.
- Revenue from operations is the primary source of revenue for the company.
- Other operating income includes revenue incidental to the business.
- The other income includes revenue from non-operating sources.
- The revenue from operations (net of duty), other operating income, and other incomes give the ‘Net Revenue from Operations.
thanks sir. you highlighted whats to be read.
1. If the proceeds from PAT directly sits in reserve and surplus of the balance sheet. Then why same amount is not added up in cash and cash equivalents.
2. Is cash and cash equivalents totally unrelated to reserve and surplus. Please explain
3. How can we add all the profit to cash reserve, though the entire amount may not be received by the company. Shall be very grateful if u explain the queries pointwise
Thanks
1) They are accounted differently under two different sides of the Balance sheet
2) Cash is the amount of liquid cash at disposal parked in banks. Why cash can be a smaller amount, R&S represents the networth of the company
3) Sorry, I don’t understand this query
I meant that how entire profit from P&L is added to reserve and surplus in BS. Though the entire depicted profits of P&L may not be received by the company.
The PAT from P&L flows into Reserves & Surplus only.
Further which part of proceeds is added in cash and cash equivalents. Please elaborate, i am totally confused between the two.
I’d suggest you check the associated schedule of cash, you’ll get an idea of cash flow. Of course, looking at cash flow statements gives you the complete picture.