Reading the income statement and balance sheet

Skills you'll practise

• Describe what the income statement, balance sheet and cash flow statement each show
• Calculate net profit and owner's equity from simple statements
• Explain why profit and the change in cash differ, using accruals, depreciation and loan repayments
• Identify misclassified items and unusual movements when comparing periods

Course outline

1. 1.Reading the income statement and balance sheetVideo · 2 min
2. 2.Three statements, three questionsLesson · 15 min
3. 3.Profit isn't cashLesson · 15 min
4. 4.Spotting figures that look wrongLesson · 15 min
5. 5.Reading the income statement and balance sheet: knowledge checkKnowledge check · 16 questions
6. 6.Final exam6 questions · passing it completes the course, so people who already know the material can test out

Sources it draws on

The lessons and questions are written from these references, so learners can go back to the original.

• U.S. SEC: Beginners' Guide to Financial Statements (balance sheet, income statement, cash flow statement)
• IRS Publication 583, Starting a Business and Keeping Records (US example: single- and double-entry systems, journals and ledgers, supporting documents, how long to keep records)
• General bookkeeping practice (journals, ledgers, control accounts, reconciliations, corrections by journal rather than deletion)