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Understanding Accounting Reports

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FAQs About Accounting Reports

  1. What is a Profit and Loss Statement? What of the firm financial data is in this report?
    • Profit and Loss, a.k.a Income Statement is the statement of activities relevant to income and expenses of the firm.
    • It uses all Income, Cost of Goods Sold (if any) and Expense Accounts on the Chart of Accounts.
    • Profit and Loss Statement covers a period of time, e.g. month, quarter, annual.
  2. What is a Balance Sheet?
    • Balance sheet is a “snapshot” of the firm’s financial position at a specific moment in time. It provides the data on what the firm owns and what it owes.
    • Components of the Balance Sheet
      • Assets, e.g. cash, advanced client costs, property (buildings, furniture, equipment)
      • Liabilities, e.g. Monies in Trust, notes payable, wages payable, taxes payable,
      • Equity, i.e. book value of the firm, e.g. paid in capital, retained earnings, net income. NOTE:
        • Owner’s Equity on the Balance Sheet is not an indication of the firm’s market value.
        • Retained earning is sum of prior year(s) income and is automatically calculated and posted by the system.
  3. What is a Trial Balance Report?
    The trial balance is a report run at the end of an accounting period, listing the ending balance in each general ledger account. The report is primarily used to ensure that the total of all debits equals the total of all credits, which means that there are no unbalanced journal entries in the CosmoLex system. 
  4. Why doesn’t current year’s 3500: Income and Expense Summary on my balance sheet match the net income on my Profit and Loss?
    • First check the date range filter to ensure from and to date for the Profit and Loss report is correct. From date should be beginning of the fiscal year. To date should be date you used for Balance Sheet review.
    • If the amounts still do not match, other plausible reason could be 3500: Income and Expense Summary chart of account has been used in a journal entry in current duration.
  5. At year-end, how do I move the prior year’s income to balance sheet?
    • CosmoLex automatically adds prior year’s net income to retained earning at beginning of each fiscal year. If you prefer to use a different equity account, use Journal Entry to move funds from Retained Earning to another account.
Updated on December 7, 2018

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