Annual Accounts and Financial Balance Sheet Analysis

Annual Accounts and the Balance Sheet

Annual Accounts: The Balance Sheet represents the assets of the company, which is the set of assets, rights, and obligations of the company at a determined time. This definition contains three elements:

• Real: All company property.
• Rights: Credits given by the company.
• Obligations: The company's debt.

The document that meets all these criteria is the balance sheet, which is an accounting document that reflects the assets of the company at a specific time, consisting of Assets, which collect all monetary valuations of the property and rights of the company.

Asset Classification

Non-Current Assets

These are property elements intended for use on a sustainable basis in the business of the company, such as land and buildings. This category includes:

• Intangible Assets: Intangible heritage assets capable of economic valuation.
• Tangible Assets: Tangible goods that are used in the production and trade of the company.
• Real Estate Investments: Tangible elements that do not act in the production and trade of the company but are held to obtain financial rents.
• Fixed Assets: Financial assets on which the company has applied specific criteria.

Current Assets

These are goods subjected to a continuous cycle of renewal:

• Stocks: Items destined for sale.
• Debtors: Debts owed by other enterprises.
• Available: Money available in cash.

Balance Equation: Assets = Equity + Liabilities

Equity and Liabilities

This section collects the monetary valuation of resources used to fund the property and rights of assets.

• Net Equity: Resources that the firm does not owe to anyone.
• Non-Current Liabilities: Resources for which there is a commitment or debt for a period longer than one year.
• Current Liabilities: A set of debts with an expiration of one year or less.

Accumulated Depreciation: These accounts reflect the irreversible loss of value suffered by fixed assets. They appear next to various elements of the assets with a negative sign.

The Profit and Loss Account

This account includes the following components:

• Net amount of sales: The total amount of sales.
• Supply: The total amount of purchases.
• Personnel costs: Employee salaries.
• Other operating expenses: Such as electricity consumption.
• Amortization of fixed assets: Loss of value due to use.
• Impairment and results from disposals: Gains or losses from fixed assets.

The Operating Result allows one to know the progress of the company's activities before the payment of interest on debts.

Financial Calculations

• A) Operating Result: The sum of all operating items.
• B) Financial Result: Financial income minus financial expenses (interest).
• C) Income Before Taxes: The sum of A + B.
• D) Profit or Loss: The final net result.