The three most important financial statements are:

1. Income Statement

The Income Statement is a report showing the financial performance of a business over a given period, through revenue and expense positions. It is monitored for certain periods, such as months, quarters, years, and the structure of the report (other than those prescribed for the annual report) depends on the many elements defined by management or the owner of the company, such as income and expense types, activity and organizational structure (organizational units, cost centers)

This is an important report that monitors the dynamics of income and expenses in the observed period and accounts for the success of the business, gross and net profit of the period by simply calculating: Revenues – Expenses = Gross Profit. The business result (gross profit) based on the financial year, along with the statutory elements of the calculation, also serves for the calculation and the basis for the profit tax which, except for one-time delivery of the annual financial statements, can be a significant cash outflow and future down- profit tax in the next financial year (year).

2. Balance Sheet

Balance Sheet is a report showing the balance sheet date of a company’s assets, equity and liabilities. This is a static report unlike the Profit and Loss Account. The balance sheet has two basic parts: Assets on the one hand and Liabilities (liabilities and capital) on the other. The side effects correspond to the way Assets shows the structure of the assets that the company has, while the other side of the Passive shows the sources from which this asset (Assets) is formed and how much of the assets the company finances from its own sources and how much of the liabilities.

3. Cash Flow Statement

Cash Flow Statement discloses cash inflows and outflows through a business account, for a specific period, and cash balance at the beginning and end of the period. There are two methods of monitoring this report, a direct and indirect method, but common for both are essential information on quality of money management and liquidity insurance.

Kakve poruke nam daju financijski izvještaji?

What kind of messages do we get from financial reports?

Income Statement, Balance Sheet and Cash Flow are the three basic financial statements and tools that give us a very specific analysis of the business and financial results, current assets and liabilities and help plan future activities and financial results.

However, the financial statements are only useful if the data is accurately and accurately recorded in the bookkeeping. For that matter, it is important to have continuous and clear communication with accounting as well as quality organization of business processes, tracking documentation and data. If the financial statements are incomplete, incorrect or untimely, they may harm the business of the company and all users of these reports.

If you do not yet have a stable and high-quality reporting system or you are unsure of the information you have in your Income Statement, Balance Sheet or any other financial report, CFO Management can help!