Finances is a broad term encompassing things regarding the study, generation, and distribution of funds. A person who specializes in the study of financial affairs may be called a financial planner, analyst, or financial analyst. Whatever label one puts to the job, it requires analytical skills as well as knowledge about money and markets to perform the duties of a financial planner. The job can be very demanding and require expertise in a wide variety of fields.
Financial planners create financial plans for individuals, families, businesses, and the government. They prepare comprehensive reports about an individual’s financial status and recommend changes to be made if necessary. The reports include income, expenses, assets, liabilities, retirement accounts, insurance, and tax returns. The financial statements are to be sent to the receiver through mail so they must be accurate and up to date. The services of a financial planner are most valuable when they produce accurate financial statements that reflect current conditions.
A balanced scorecard helps make sense of the financial statements. It divides costs and revenue between similar businesses in different industries. An analysis of the popsicles is important because the scorecard can be used to compare costs and revenues by industry. The analysis of the popsicles reveals information about the income statement, balance sheet, and profit and loss statement.
The financial statements also need to contain the balance sheet. This part of the report includes the details of all company assets, liabilities, revenues, and expenses. The balance sheet is divided into two sections: assets, which include accounts receivable and inventory; and liabilities, which include accounts payable and accrued expenses. The bank’s balance sheet is prepared monthly, so it must be prepared in a timely manner.
The income statements display the income of the business minus expenses. These include gross profit, net income, and gross loss. The balance sheets provide the details of cash and liquid assets, long and short positions, equity, and ownership stock. The last section of the financial statements, the bottom line, gives the bank’s bottom line, or profit and loss statement.
The accounting principles behind the presentation of the income statement, balance sheet, and profit and loss statement are the same for all banks. The only difference among them is the source of funds for the various activities of the business, and the method of reporting activity to the outside financial institutions. In essence, all banks use the same method to report the business’ income statement, balance sheet, and profit and loss statement.