An income statement is a financial report that shows a company’s revenue, expenses, and profit or loss over a specific period (for example, a month or a year).

Structure of an income statement It is often presented like this:

1. Revenue

• Sales of goods or services

2. Cost of goods sold (COGS)

• Inventory + purchases, etc.

Revenue – COGS = Gross profit

3. Operating expenses

• Salaries

• Rent

• Electricity

• Advertising, etc.

Gross profit – operating expenses = Operating profit

4. Financial items

• Interest income or interest expenses

5. Profit or loss

Final result = Profit (if positive) or loss (if negative)

A balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time, often at the end of a financial year or accounting period.

A balance sheet is divided into two main sections:

1. Assets

What the company owns or has a right to:

• Current assets, such as cash, trade receivables, and inventory

• Non-current assets, such as real estate, machinery, and equipment

2. Liabilities and Equity

How the assets are financed:

• Liabilities, such as loans and amounts owed to suppliers

• Equity, consisting of owners' contributions and profits retained in the business

A balance sheet is based on the accounting equation:

Assets = Liabilities + Equity

Cash flow is a financial statement that shows the movement of cash into and out of a company over a specific period.

Structure of a cash flow statement

Cash flow is divided into three sections:

1. Operating cash flow

Cash generated from day-to-day operations:

• Payments received from customers

• Payments for wages, raw materials, operations and other expenses

This shows whether the operations themselves are generating cash.

2. Investing cash flow

Relates to the purchase and sale of assets:

• Purchase of equipment and real estate

• Sale of assets

This is often negative when a company is investing for the future.

3. Financing cash flow

Relates to the financing of the company:

• Loans taken out or repaid

• Capital contributed or withdrawn by owners

The statement of financial performance shows income and expenses over a specific period, such as one year. It also shows whether income was higher or lower than expenses during that period.

Income may include, for example, taxes, grants and income from services.

Expenses are the costs of providing services and carrying out activities. Examples include salaries, goods and services, and depreciation.

The difference between income and expenses is the surplus or deficit for the period:

Income – expenses = surplus/deficit

If income is higher than expenses, there is a surplus. If expenses are higher than income, there is a deficit.

Fiscal balance is achieved when public revenue is sufficient to cover public expenditure.

When fiscal balance is maintained, government revenue and expenditure remain in balance over time. This supports sustainable public finances and reduces the need for additional borrowing.

A deficit occurs when expenditure exceeds revenue. A surplus occurs when revenue exceeds expenditure.

Maintaining fiscal balance contributes to stable public finances and helps keep public debt under control.