Josh Aharonoff
Jun 29, 2023
Welcome to Legit Numbers!
This week, I have a special treat for you. I'm sharing a comprehensive Financial Statements Cheat Sheet that covers everything you need to know. From the basics to the intricate details, it's all here.
I'll also explore the how Balance Sheet and Income Statement interact and influence each other.
And finally, the essential financial reports that play a crucial role in your reporting.
What we’ll be covering in this edition:
Financial Statements Cheat Sheet
How the Balance Sheet Connects to the Income Statement 🔃
The Superhero Financial Reports 🦸🦹♀️
Let's dive in...
with resources for almost every topic
This cheat sheet contains close to everything I know about the Financial Statements
And the encyclopedia of resources below will help you master it all
➡️ Overview of Financial Statements
The 3 financial statements
A guide to the financial statements
Understand all 3 statements
Financial statements 101
Understand Financial Statements in less than 2 minutes
➡️ The Profit & Loss
The Profit & Loss
Build a Profit & loss
24 Startup Profit & loss
➡️ The Balance Sheet
The Balance Sheet
Analyze a business with just a balance sheet
Understand a Balance sheet in 24 seconds
The sections of the balance sheet (with examples)
➡️ The Statement of Cash Flows
The Statement of Cash Flows https://lnkd.in/eK4cs8qz
Direct vs Indirect Method https://lnkd.in/en-yDyER
The Sections of the Cash Flows https://lnkd.in/eHrY66Cv
➡️ Other Relevant Info
The Chart of Accounts
The difference between a P&L and a balance sheet
Difference between Gross Profit, Net Income, EBITDA, and Cash Flows
Cash vs Accrual
COGS vs Opex
Accounts Receivable
Accounts Payable https://lnkd.in/ewqihm7w
Prepaid expenses https://lnkd.in/ezaJREcT
Gross Profit & Gross Margin
Retained Earnings
Deferred Revenue
I hope this cheat sheet + encyclopedia gives you the value it’s given me in my career
Click the image to download the graphic in HD
The Balance Sheet contains the most amount of information between all 3 statements
and it PULLS a lot of data from the Income Statement…
and shares Debits & Credits
Here’s how:
1. Retained Earnings & Net Income
This is the biggest one.
Everything from your P&L gets boiled down into Net Income..
which feeds into your Balance Sheet via Retained Earnings
Balance Sheet → Retained Earnings
Profit & Loss → all prior net income
2. Depreciation & Accumulated Depreciation
Depreciation is the wear and tear on your fixed assets
it gets recorded as an expense on your income statement…
and gets ACCUMLATED onto your balance sheet
Balance Sheet → Accumulated Depreciation
Profit & Loss → All prior depreciation expense
Journal Entry → Debit Depreciation, Credit Accumulated Depreciation
3. Deferred Revenue & Revenue
Revenue is your income
Deferred Revenue is the income that you’ve invoiced / collected, but haven’t delivered
Balance Sheet → Deferred Revenue
Profit & Loss → Future Revenue
Journal Entry → Debit Deferred Revenue, Credit Revenue
4. Prepaid Expenses & Expenses
Prepaid Expenses are expenses that you paid for…
that you have yet to consume
When you do consume the benefit...
it reduces your prepaid asset, and gets expensed to the P&L
Balance Sheet → Prepaid Expenses
Profit & Loss → Any Future Expense (ex: software, advertising, travel)
Journal Entry → Debit Expense, Credit Prepaid Expense
5. Accruals & Expenses
Accruals are like estimates for expenses that you have incurred, but have not paid / received a bill
It gets represented as a liability, which then gets reduced as you pay / receive the bill
Balance Sheet → Accrued Expenses
Profit & Loss → Any expenses already recognized
Journal Entry → Debit Expense, Credit Accrued Expense
6. Accounts Payable & Expenses
Accounts Payable is the amount that you owe to your vendors for products / services purchased
It’s a liability, which decreases once payments are made
Balance Sheet → Accounts Payable
Profit & Loss → Any expenses already recognized
Journal Entry → Debit Expense, Credit Accounts Payable
7. Accounts Receivable and Revenue
Accounts Receivable is the amount owed to you by customers for products / services you sold
When you collect cash, the asset decreases
Balance Sheet → Accounts Receivable
Profit & Loss → Recognized Revenue
Journal Entry → Debit Accounts Receivable, Credit Revenue
Those are just a few ways in which the Balance Sheet & Profit & Loss are connected
There are many other examples
What would you add?
Click the image to download the graphic in HD
each one plays a crucial role in your financial reporting
Chart of Accounts
Bank Register
Bank Reconciliation Report
General Ledger
Trial Balance
AP Aging
AR Aging
Income Statement
Balance Sheet
Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
I hope you enjoyed this week's edition of Legit Numbers!
If you haven't already replied to say hello, please do and let me know how I can help - I reply to all of my emails personally :)
Till next time!