A balance sheet is a financial statement that reflects the financial position of a business at a specific date, and it shows the assets, liabilities and owners' equity of the company. Through the balance sheet, we can understand the profit or loss of a business. Here's how to look at a company's profit or loss from its balance sheet:
Asset Class Accounts: These accounts show the assets of the enterprise, including cash, accounts receivable, inventory, fixed assets, and so on. If the balance of these accounts is positive, it means that the business has the asset;If the balance is negative, it means that the business has that liability.
Liabilities Accounts: These accounts show the liabilities of the enterprise, including accounts payable, short-term borrowings, long-term liabilities, and so on. If the balance of these accounts is positive, it means that the business has the liability;If the balance is negative, it means that the business has that ownership interest.
Owner's Equity Accounts: These accounts show the owner's equity of the enterprise, including share capital, capital reserve, surplus reserve, and undistributed profits. If the balance of these accounts is positive, it means that the business has that ownership interest;If the balance is negative, it means that the business has that liability.
To understand the profit or loss of a business, you need to pay attention to the following subjects:
Net Profit: This account shows the net profit of the business in an accounting period. If the net profit is positive, it means that the company is profitable;If the net profit is negative, it means that the business is losing money.
Undistributed Profit: This account shows the balance of undistributed profit of the enterprise during an accounting period. If the balance of undistributed profits is positive, it means that the enterprise has undistributed profits;If the balance is negative, it means that the business has an uncovered loss.
Asset Impairment Provision: This account shows the cumulative amount of asset impairment allowance drawn by the enterprise. If the balance of asset impairment allowance is positive, it means that the enterprise has withdrawn the impairment provision;If the balance is negative, it means that the company has reversed the impairment provision.
Deferred Tax Assets and Deferred Tax Liabilities: These two accounts show the deferred tax assets and deferred tax liabilities for taxable temporary differences and deductible temporary differences, respectively. If the balance of deferred tax assets is positive, it represents the tax that can be deducted in the futureIf the balance of the deferred tax liability is positive, it indicates the amount of tax that the business will need to pay in the future.
By analyzing the balances and relationships between the above accounts, we can preliminarily judge the profit or loss of the enterprise. At the same time, it is also necessary to conduct comprehensive analysis and judgment based on other financial statements and indicators, such as income statement, cash flow statement, etc., as well as factors such as industry background and market environment, so as to have a more accurate understanding of the financial status and operating performance of the enterprise.
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