Financial Statement Analysis

Financial Statement Analysis

Financial statement is simply keeping the accounts.

One would usually find me do some kind of accounting every month end after I receive my salary:

Lets me take you through my 3 month accounting

This is done to check how much money I have spent during the month and how much I could save. The above table is a representation of an Income statement.

My monthly saving would change depending on how prudently I spend my money. There are months I am reckless while spending (Jul’09) and have borrowed money, used credit card extensively and there are months where I have a surplus (May’09).

Having completed one year with SBI I now wanted to check how I have spent the money, how much have I invested, how much I have borrowed, how much do others owe me, how much do I owe them. Just to know how much was I worth.

So I set out to scrabble for each investment made, money spent. Finally I prepare a statement which turns out be the following:

I have received Rs. 384000 as monthly salary and got a bonus of Rs. 180000

This calculation immediately made me realize I needed to be worth another Rs. 9,99,99,79,000 to be called a billionaire.

So what is an asset?

Asset is anything which you own (liable to own) and has monetary value (quantified in rupees). If I have lent money to you, it is still my asset as you have an obligation to pay me back that sum.

What is a Liability?

Liability is anything which I have borrowed has monetary value and has an obligation to repay. I have Vodafone post paid mobile connection and have an obligation to pay for the services (call, sms, caller tune) provided.