Enjoyed this video? Then subscribe to the channel right now, and let's go into much more detail on how to read an income statement: ua-cam.com/video/Hq-44PHgAiU/v-deo.html
Sir, this is the most clear explanation of the BS and P&L relation that I have ever seen. I work in finance, but my work and experience has been always focused on the P&L, so I lack real knowledge of the BS. Your videos are extremely helpful for refreshing the knowledge. Thanks!
Hello Ruslan! Thank you very much for the kind words. Yes, in the various finance roles that I have done in the past, the focus was also mostly on the P&L. Now that I teach finance and business, I discover the value of the balance sheet as well as the cash flow statement more and more. Here's a tutorial on the balance sheet (Walmart case study) ua-cam.com/video/eIjCaeNm-Vk/v-deo.html and a few examples on why profit and cash flow from operations are not always the same number: ua-cam.com/video/SX6tDy7YPgc/v-deo.html Enjoy, and let me know what you think!
You're very welcome! Have a look at some of the case studies for real world companies that I have done (on balance sheet and income statement individually): ua-cam.com/video/J_1F8GoLOI8/v-deo.html&pp=gAQBiAQB
Wow, thanks! And congrats to you for finding additional resources like my UA-cam channel to help you move forward in your education. Please share the link to the channel with your fellow students.
Thank you, Yadagirii! That is very nice to hear. Please subscribe to the channel, I hope you find many more useful videos. Here's one that I would recommend, around 5 "Big Ideas" in the finance field: ua-cam.com/video/iR7b2NjgAO8/v-deo.html and you go from there to other videos of interest through the links/endscreen.
Thank you for the kind words, Kaua! Hope you find many more useful videos on this channel. If I may give a suggestion, take a look at my video explaining the balance sheet: ua-cam.com/video/eIjCaeNm-Vk/v-deo.html
Thank you so much, Omar! You can do it! :-) Please spread the word to your fellow students. Having a solid grasp of accounting logic will benefit you in any leadership role. Hope you find plenty of useful information on my channel.
Very good video, thanks a lot! This is very clear and precise to comprehend as opposed to other similar channels out there. Much appreciated and keep up the great work.
Thank you very much, Vay! I have a few examples of how to analyze income statement and balance sheet for real-life companies on my channel. These might be helpful for you as well. Enjoy!
Nice to hear that! I have used this example many times with groups of participants for "finance for non-financial managers" courses. Once you understand the interactions between these financial statements, it's good to go into more depth for the income statement ua-cam.com/video/Hq-44PHgAiU/v-deo.html as well as the balance sheet ua-cam.com/video/eIjCaeNm-Vk/v-deo.html or dive into specific terms that you want to learn more about like revenue ua-cam.com/video/816Q6pOaGv4/v-deo.html
Awesome vid - made a lot sense! Thanks Can you do similar vids how balance sheet interact with cash flow statement and income statement with cash flow statement? If you have those already please provide links
Thank you! Happy to hear you enjoyed it. I do have a short video on how the three financial statements relate: ua-cam.com/video/EjfyfDuQmdk/v-deo.html and a video that explains with some short practical examples the difference between net income and cash flow from operations ua-cam.com/video/SX6tDy7YPgc/v-deo.html and a video that explains how to go from net income to cash flow using the indirect method ua-cam.com/video/2tr_6D2SE3w/v-deo.html
1.I have read some articles which says that losses are shown on the asset side of the balance sheet !! 2. And i also know & have seen in companies balance sheets that losses are subtracted from retained earnings. I am confused about the first statement, are both the statement true? Arent we double counting the effect of loss if we follow both the statements?.
I agree with statement #2: see my video on retained earnings ua-cam.com/video/xiwQh5E7JWQ/v-deo.html The only way I can make sense of statement #1 is that you could have (for example) an impairment of goodwill or intangible assets, uncollectable receivables, obsolete inventory - all of these are occurring on the assets side of the balance sheet, lead to a charge in the income statement, and could lead to a company making a loss (negative profit) in a certain quarter or year. See also my video on asset impairment: ua-cam.com/video/lWMDdtHF4ZU/v-deo.html
Thanks for the feedback, Joel! It is a problem in the English language. Sometimes the word "liabilities" is used to indicate the whole right-hand side of the balance sheet (the "broad" use), at other times it is used to only indicate money owed to creditors (banks, suppliers, etc. - the "narrow" use). You are correct that in the "narrow" sense of the word, the accounting equation states that assets = liabilities + equity. As far as I know, there is no separate word in English for the right-hand side of the balance sheet. In French, for example, the left-hand side is called "les actives" and the right-hand side "les passives", there is no equivalent for that in English.
It's the fundamental idea behind the double entry accounting system (assets = liabilities + equity) plus the balance sheet totals tell you something about the size of the company. Here's the link to my balance sheet tutorial, walking through the statement for a real life company: ua-cam.com/video/eIjCaeNm-Vk/v-deo.html
Hello Vanessa! No, those would go into the income statement. Here's a link to a tutorial on how to read an income statement: ua-cam.com/video/Hq-44PHgAiU/v-deo.html
Hello Monir! In the example in this video, the company makes a profit, which is not distributed to shareholders. Therefore, it is added to the retained earnings account in the equity section of the balance sheet. If the sum of the accumulated profits and losses is a positive number, then the retained earnings account shows a positive balance. If the sum of the accumulated profits and losses is a negative number, then the retained earnings account shows a negative balance, and becomes a "contra equity account" (NOT an asset): ua-cam.com/video/ixkdvOT7ZDI/v-deo.html
Sir, u have mentioned account receivable as 200 then it's adjusted.. what if account receivable is 300.. The excess 100 rs where it will be adjusted... pls response ❤
The 200 in accounts receivable comes into existence when the invoicing occurs for the product delivered. 200 in the income statement for revenue, 200 on the balance sheet for the receivable. Hopefully, the customer will pay this invoice subsequently which will make the accounts receivable balance go to zero, and cash increase by 200. I am not sure what you mean with "adjusted accounts receivable". This balance does not jump up or down by itself. If the company generates additional sales, then the accounts receivable balance can go up. If the customer is unable or unwilling to pay, then the accounts receivable balance might have to be taken down. See my video on bad debt accounting ua-cam.com/video/q7Whr_A4drE/v-deo.html
all good, but equity should not have been labelled as a subcategory of liabilities but stands on its own as the third component of the BS such that A = L + E, or A - L = E...
Correct. It took me a while to figure out that the English language lacks a word for the right-hand side of the balance sheet. In French, it is called "les passives", in German "die Passiven", in many other languages a variation thereof. Only in English is it "liabilities and equity".
Don't understand why owned = owed. For example, business buys a truck and borrows 100,000. We owe 100,000. Let's say we pay interest only on the truck. After 5 yrs we still owe 100,000 because we didn't pay off any principle. The truck has been treated poorly and is now only worth 50,000. Doesn't "balance" and you wouldn't expect it to. Balance sheets make no sense.
Oh yes, it does balance. Initially, in your example you have 100K in assets and 100K in liabilities. Then you start using the truck (incurring depreciation) and you need to account for the interest on the loan as you correctly stated. Using your numbers, we record 10K per year in depreciation of the truck, and let's say 5K in interest expense per year. Those 15K in total are expenses in our income statement, that end up in retained earnings (part of equity) at the end of the year on the balance sheet. So if this is all the business has (which is very unlikely, hopefully you also generate some revenue from selling something), and forgetting about taxes at the moment (let's not make the example too complicated) then at the end of year 1 we have 90K in assets (100K purchase price of the truck minus 10K depreciation), in liabilities 105K in borrowings plus interest owed, and equity -15K (sum of depreciation expense and interest expense). At the end of year 5: 50K in assets (per your example: 100K purchase price minus 5 times 10K in depreciation), liabilities 125K (100K + 5 times 5K interest owed), and equity -75K (5 times 15K expenses per year). Now having that kind of significant negative equity would make you bankrupt, and the bank probably will have repossessed the truck by that time. Does that help?
My lecturer confused me so bad, she went on and on for 2hr's about something that could be explained perfectly in 4 mins. Why did she make it so difficult, I don't get it
Sorry to hear that, Robbie! It's a good thing that you went out to find additional information on this, hope you get it now. Maybe you can teach the topic back to her. ;-)
I have one question about quicks book. I want to add one hidden column in sale invoice as cost column... Which can be seen by our company n every time I can change the figures of both sale service N cost service. Can u help? But in print not showing cost column
![Lp. Сердце Вселенной #60 РОЖДЕНИЕ ЛОЛОЛОШКИ [Финал] • Майнкрафт](http://i.ytimg.com/vi/YoR0pAV9FVQ/mqdefault.jpg)
Enjoyed this video? Then subscribe to the channel right now, and let's go into much more detail on how to read an income statement: ua-cam.com/video/Hq-44PHgAiU/v-deo.html
Thank you, my teacher is soo trash, especially during online classes for quarantine. You saved my marks!
Happy to help! Maybe the videos in my "Accounting 101" playlist can also be helpful to you: ua-cam.com/video/OYql7Y9NnBg/v-deo.html
Never say trash to any teacher
@@sahrisahil713 Ok boomer
@@aries3690 Oh God, this comment is cringe.
As a student, i do agree some teacher are bad. Like I'm not paying my hard earned money for understanding nothing.
Sir, this is the most clear explanation of the BS and P&L relation that I have ever seen. I work in finance, but my work and experience has been always focused on the P&L, so I lack real knowledge of the BS. Your videos are extremely helpful for refreshing the knowledge.
Thanks!
Hello Ruslan! Thank you very much for the kind words. Yes, in the various finance roles that I have done in the past, the focus was also mostly on the P&L. Now that I teach finance and business, I discover the value of the balance sheet as well as the cash flow statement more and more. Here's a tutorial on the balance sheet (Walmart case study) ua-cam.com/video/eIjCaeNm-Vk/v-deo.html and a few examples on why profit and cash flow from operations are not always the same number: ua-cam.com/video/SX6tDy7YPgc/v-deo.html Enjoy, and let me know what you think!
This was very helpful, thanks! I loved the delivery too - no nonsense, no jokes or gimmicks, streetlight on point and at a good pace.
Great to hear! Yeah, I love going straight to the point, I think that's best for everybody.
Very clear explanation and straight to the point.
@@ErikBoyd-g6zThank you, Erik!! 😊
this is the best video on the subject, considering its length. thanks a lot!
You're very welcome! Have a look at some of the case studies for real world companies that I have done (on balance sheet and income statement individually): ua-cam.com/video/J_1F8GoLOI8/v-deo.html&pp=gAQBiAQB
Thank you, you are much better than my accounting lecturer!!
Wow, thanks! And congrats to you for finding additional resources like my UA-cam channel to help you move forward in your education. Please share the link to the channel with your fellow students.
Well explained...Easy to understand for all who is not from financial background.
Thank you, Yadagirii! That is very nice to hear. Please subscribe to the channel, I hope you find many more useful videos. Here's one that I would recommend, around 5 "Big Ideas" in the finance field: ua-cam.com/video/iR7b2NjgAO8/v-deo.html and you go from there to other videos of interest through the links/endscreen.
This answers exactly what I didn't get before. Thanks a lot!
Happy to help! Once you see the interactions between these two financial statements, the logic of double entry accounting makes a lot more sense.
great refresher in less than 5 minutes, well done
Thank you, Gergo!
Learned more in this Fidetham my entire High school career. Thanks chief 🤙🏾🤙🏾🔥
Thank you for the kind words, Kaua! Hope you find many more useful videos on this channel. If I may give a suggestion, take a look at my video explaining the balance sheet: ua-cam.com/video/eIjCaeNm-Vk/v-deo.html
I'm doing MBA degree but still visiting this channel, especially when it comes to my weakness calculus and finance. really thank you so much !
Thank you so much, Omar! You can do it! :-) Please spread the word to your fellow students. Having a solid grasp of accounting logic will benefit you in any leadership role. Hope you find plenty of useful information on my channel.
Do calculus is play some rule in finanacing??
Thank you so much for this video. It was really helpful. I’m getting ready for the interview. Refreshing my memory.
Glad it was helpful! Wishing you lots of success with the interview!
Very good video, thanks a lot! This is very clear and precise to comprehend as opposed to other similar channels out there. Much appreciated and keep up the great work.
Thank you very much, Vay! I have a few examples of how to analyze income statement and balance sheet for real-life companies on my channel. These might be helpful for you as well. Enjoy!
Thank you...it was the pieces of the puzzle I was missing
You're welcome! Happy to hear that. :-)
Excellent simple explanation. Thank you.
Good to hear that! Thank you. When I deliver "finance for non-financial managers" training, I start off my sessions with this exercise.
finally understand this topic, thank you!!
That is wonderful to hear, Samuel!!! Thank you for watching and commenting. Hope you find many more videos on the channel that are useful to you.
@@TheFinanceStoryteller many many more to be watched and understood, sir!
Excellent explanation! Thanks
Happy to help!!!! :-)
This is really helpful! Thank you so much!!
You're welcome! Thank you for commenting, it's nice to get feedback.
Great information. Thank u 🙏💕
You're welcome! Happy to hear you enjoyed it.
Very easy n helpful.
Thanks sir
Thank you very much! Nice to hear that!
I enjoyed the video
😍
Happy to hear that! Thank you.
Thank you for this!
Thank you, Zach!
Thank you very much!!
You're welcome, Maria!
Amazing!! So clear
Wonderful! Happy to hear that.
Thanks for your explanation 🙏🏻🤍🥺
Happy to help, Akram! 😊
This video is awesome!!
Nice to hear that! I have used this example many times with groups of participants for "finance for non-financial managers" courses. Once you understand the interactions between these financial statements, it's good to go into more depth for the income statement ua-cam.com/video/Hq-44PHgAiU/v-deo.html as well as the balance sheet ua-cam.com/video/eIjCaeNm-Vk/v-deo.html or dive into specific terms that you want to learn more about like revenue ua-cam.com/video/816Q6pOaGv4/v-deo.html
Thank you so much for this
You're so welcome! Happy to help.
good and clear, with numbers !
Thank you, Angelo! Happy to hear that.
This lecture is Bravoo
Thank you!!!! The interrelationships between balance sheet and income statement are very important to understand.
Awesome vid - made a lot sense! Thanks
Can you do similar vids how balance sheet interact with cash flow statement and income statement with cash flow statement? If you have those already please provide links
Thank you! Happy to hear you enjoyed it. I do have a short video on how the three financial statements relate: ua-cam.com/video/EjfyfDuQmdk/v-deo.html and a video that explains with some short practical examples the difference between net income and cash flow from operations ua-cam.com/video/SX6tDy7YPgc/v-deo.html and a video that explains how to go from net income to cash flow using the indirect method ua-cam.com/video/2tr_6D2SE3w/v-deo.html
Wow, thank you so much sir
Happy to help!!!
Suer clear and easy to understand
Thank you! Very nice to hear that. :-)
Really Thank You!
You're welcome!
This video saved life
Wow. Good to hear it was useful. Related videos in this playlist: ua-cam.com/video/EibibVFEkvk/v-deo.html&pp=gAQBiAQB
Thanks bro. Clutch
No problem 👍
so usefull dude
Glad to hear, Isaac!
This is fantastic
Thank you! Please spread the word!
1.I have read some articles which says that losses are shown on the asset side of the balance sheet !!
2. And i also know & have seen in companies balance sheets that losses are subtracted from retained earnings.
I am confused about the first statement, are both the statement true? Arent we double counting the effect of loss if we follow both the statements?.
I agree with statement #2: see my video on retained earnings ua-cam.com/video/xiwQh5E7JWQ/v-deo.html
The only way I can make sense of statement #1 is that you could have (for example) an impairment of goodwill or intangible assets, uncollectable receivables, obsolete inventory - all of these are occurring on the assets side of the balance sheet, lead to a charge in the income statement, and could lead to a company making a loss (negative profit) in a certain quarter or year. See also my video on asset impairment: ua-cam.com/video/lWMDdtHF4ZU/v-deo.html
@@TheFinanceStoryteller i found first statement when i was studing about internal reconstruction.
Thank you
You're welcome
Sir will you plz bring more videos ?
Or explan in detail? ❤️👍
Working on some new ones! In the meantime, feel free to browse through the existing library.
Ok thank u 😉❤️
at 0:39 , thats wrong. Total assets, do not equal total liabilities. Total assets equal total liabilities PLUS equities
Thanks for the feedback, Joel! It is a problem in the English language. Sometimes the word "liabilities" is used to indicate the whole right-hand side of the balance sheet (the "broad" use), at other times it is used to only indicate money owed to creditors (banks, suppliers, etc. - the "narrow" use). You are correct that in the "narrow" sense of the word, the accounting equation states that assets = liabilities + equity. As far as I know, there is no separate word in English for the right-hand side of the balance sheet. In French, for example, the left-hand side is called "les actives" and the right-hand side "les passives", there is no equivalent for that in English.
Does The balance amount of balance sheet show the something our it is just for checking a mathematical accuracy.
It's the fundamental idea behind the double entry accounting system (assets = liabilities + equity) plus the balance sheet totals tell you something about the size of the company. Here's the link to my balance sheet tutorial, walking through the statement for a real life company: ua-cam.com/video/eIjCaeNm-Vk/v-deo.html
@@TheFinanceStoryteller thank you 👍
@@Malayamakiya Thank you for watching and commenting!
would you include things like income expenses, rent expenses, interest expenses or insurant expenses in a balance sheet?
Hello Vanessa! No, those would go into the income statement. Here's a link to a tutorial on how to read an income statement: ua-cam.com/video/Hq-44PHgAiU/v-deo.html
Nice
Agree! 😉
why net loss includes in balance sheet as asset side?:
Hello Monir! In the example in this video, the company makes a profit, which is not distributed to shareholders. Therefore, it is added to the retained earnings account in the equity section of the balance sheet. If the sum of the accumulated profits and losses is a positive number, then the retained earnings account shows a positive balance. If the sum of the accumulated profits and losses is a negative number, then the retained earnings account shows a negative balance, and becomes a "contra equity account" (NOT an asset): ua-cam.com/video/ixkdvOT7ZDI/v-deo.html
Sir, u have mentioned account receivable as 200 then it's adjusted.. what if account receivable is 300.. The excess 100 rs where it will be adjusted... pls response ❤
The 200 in accounts receivable comes into existence when the invoicing occurs for the product delivered. 200 in the income statement for revenue, 200 on the balance sheet for the receivable. Hopefully, the customer will pay this invoice subsequently which will make the accounts receivable balance go to zero, and cash increase by 200.
I am not sure what you mean with "adjusted accounts receivable". This balance does not jump up or down by itself. If the company generates additional sales, then the accounts receivable balance can go up. If the customer is unable or unwilling to pay, then the accounts receivable balance might have to be taken down. See my video on bad debt accounting ua-cam.com/video/q7Whr_A4drE/v-deo.html
The channel must = 10 milion subscribers
I agree! Please tell all your friends. 🙂
all good, but equity should not have been labelled as a subcategory of liabilities but stands on its own as the third component of the BS such that A = L + E, or A - L = E...
Correct. It took me a while to figure out that the English language lacks a word for the right-hand side of the balance sheet. In French, it is called "les passives", in German "die Passiven", in many other languages a variation thereof. Only in English is it "liabilities and equity".
Don't understand why owned = owed.
For example, business buys a truck and borrows 100,000. We owe 100,000.
Let's say we pay interest only on the truck.
After 5 yrs we still owe 100,000 because we didn't pay off any principle.
The truck has been treated poorly and is now only worth 50,000.
Doesn't "balance" and you wouldn't expect it to.
Balance sheets make no sense.
Oh yes, it does balance. Initially, in your example you have 100K in assets and 100K in liabilities. Then you start using the truck (incurring depreciation) and you need to account for the interest on the loan as you correctly stated. Using your numbers, we record 10K per year in depreciation of the truck, and let's say 5K in interest expense per year. Those 15K in total are expenses in our income statement, that end up in retained earnings (part of equity) at the end of the year on the balance sheet. So if this is all the business has (which is very unlikely, hopefully you also generate some revenue from selling something), and forgetting about taxes at the moment (let's not make the example too complicated) then at the end of year 1 we have 90K in assets (100K purchase price of the truck minus 10K depreciation), in liabilities 105K in borrowings plus interest owed, and equity -15K (sum of depreciation expense and interest expense). At the end of year 5: 50K in assets (per your example: 100K purchase price minus 5 times 10K in depreciation), liabilities 125K (100K + 5 times 5K interest owed), and equity -75K (5 times 15K expenses per year). Now having that kind of significant negative equity would make you bankrupt, and the bank probably will have repossessed the truck by that time.
Does that help?
Today is my Viva 🥺
Wishing you lots of success!!!
@@TheFinanceStoryteller that was great 5/5 yuppe 😆
My lecturer confused me so bad, she went on and on for 2hr's about something that could be explained perfectly in 4 mins. Why did she make it so difficult, I don't get it
Sorry to hear that, Robbie! It's a good thing that you went out to find additional information on this, hope you get it now. Maybe you can teach the topic back to her. ;-)
I have one question about quicks book. I want to add one hidden column in sale invoice as cost column... Which can be seen by our company n every time I can change the figures of both sale service N cost service. Can u help? But in print not showing cost column
Sorry, but I have never used Quickbooks in my life, so I cannot help you on that question...