Financial statements

The financial statements show what the business owns and owes on a day, and what it earned over a period. They are built from your chart of accounts: each account lands on the balance sheet or the income statement by its type, and your heading accounts become the groups the statements are arranged in.

Check the trial balance

Start each month end with the trial balance. It lists every account that moved, so a figure in the wrong account shows up before it reaches the statements.

1. Go to Finance ‣ Reports and, on the Finance tab, click Trial balance.
2. Pick the Period. It starts at Year to date.
3. Click Run.

Each account has one row, under its heading account and indented by level:

Column	What it shows
Opening balance	The balance before the period starts, debit positive.
Debit and Credit	What was posted to the account in the period.
Net change	Debit less credit for the period.
Ending balance	The opening balance plus the net change.

A heading account shows the sum of the accounts under it. Accounts with nothing in any column are left out. The Total row, and the cards above the results, add up the posting accounts only, so a heading is never counted twice. Total debit and Total credit are always equal, because every entry posts in balance.

Example

A pharmacy’s accountant runs the trial balance for last month and sees a debit on an income account. It turns out a supplier refund was booked against sales. She voids the journal entry and posts it again to the right account before printing the statements.

Read the balance sheet

The balance sheet shows what the business owns and owes at the end of one day.

1. Go to Finance ‣ Reports and, on the Finance tab, click Balance sheet.
2. Pick the As of date. It starts at Today.
3. Click Run.

The report has three sections: Assets, Liabilities and Equity. Each lists its accounts under your heading accounts, with the balance of each one at the end of the day you picked. Liabilities and equity are shown as positive amounts when they are in credit, as they normally are. An amount in brackets runs against its section’s usual side.

At the end of Equity, Retained Earnings (Current Period) holds the profit or loss that no year-end closing entry has moved into equity yet. Below the sections, Total liabilities & equity is set against the assets. Balanced beside the title confirms the two sides agree. The cards above show Total assets, Total liabilities and Total equity.

Read the income statement

The income statement shows what the business earned and spent over a period, and the profit left.

1. Go to Finance ‣ Reports and, on the Finance tab, click Income statement.
2. Pick the Period. It starts at Year to date.
3. Click Run.

The report has three sections, in the order the profit is worked out:

Section	What it holds
Revenue	Your income accounts.
Cost of goods sold	What the goods you sold cost you. Gross profit, below it, is revenue less this cost.
Expenses	Your other costs. Net income, at the bottom, is gross profit less expenses.

Within a section, accounts are grouped under the top heading accounts of your chart. Accounts that sit under no heading form a group of their own. The cards above show Total revenue, Cost of goods sold, Gross profit and Net income.

Note

The year-end closing entry is left out of the income statement, so a closed year still shows the profit it made. See Close the fiscal year.

List the ledger entries

When a figure in a statement needs explaining, list the entries behind it.

1. Go to Finance ‣ Reports and, on the Finance tab, click Account ledger.
2. Click Add filter, pick Account, and pick the account.
3. Add a Posting date or Document date range to match the period of the statement.

Each entry shows its Document date, Posting date, Document, Description, Debit and Credit. The Debit and Credit cards add up every entry the filters keep, not only the page on screen. You can also filter by Account type, Currency or Document no., and search by document number or description.

Tip

To open the journal entry behind a line, use the account’s own Ledger tab instead: its lines open the entry. See See an account’s entries. To print the account’s ledger with a running balance, see Print a document.