Vanity, sanity & realityUnderstanding the numbers

John Toon and Phil Greenwood

Profit and loss account

Balance sheet

Cash flow management

Profit and loss accountPhil Greenwood

Profit and loss account

Shows the profit or loss generated by a business for a given period of time (usually a year). 

Gives a breakdown of income and expenditure for the period.

Used by HMRC to assess how much tax there is to pay.

Doesn’t indicate how much cash the business has made or spent in the period.

Balance SheetJohn Toon

Stat balance sheetMapple Limited Balance Sheet Year Ended 31 March 2010

Balance sheetMapple Limited Balance Sheet as at 31 March 2010

Balance sheetMapple Limited Balance Sheet as at 31 March 2010

Balance sheetMapple Limited Balance Sheet as at 31 March 2010

Balance sheet

A snapshot at a given point in time(usually the year end) of a businesses assets and liabilities.

Assets and liabilities are split into different categories depending on their type and nature.

CashflowPhil Greenwood and John Toon

CashflowMapple Limited Cashflow Statement Year Ended 31 March 2010

` £ £

OPERATING PROFIT/(LOSS) 18,000

DEPRECIATION CHARGES 3,000

(INCREASE)/DECREASE IN STOCK/WIP (5,000)

(INCREASE)/DECREASE IN DEBTORS (15,100)

INCREASE/(DECREASE) IN CREDITORS 4,340

NET CASH FLOW FROM OPERATING ACTIVITIES 5,240

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE

INTEREST PAID (500)

(500)

CAPITAL EXPENDITURE (9,000)

FINANCING

ISSUE OF EQUITY SHARE CAPITAL 100

INCREASE/(DECREASE) IN CASH (4,160)

Cashflow

Shows the cash generated or spent for the period.

Not as detailed as the P&L account.

Not required by most businesses due to

size (and type).

There is a standard format fixed by law.

Vanity

Sanity

Reality

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