Designing financial statements

This summarises all sales made to customers during the period. All expenditure of the organisation is listed under the various headings.

Expenditure is listed regardless of whether invoices have been paid.

The profit or loss is found by deducting one total from the other.

The Profit and Loss report uses the posting and memorandum nominal account values that are stored specifically for Profit and Loss reporting.

This compares the net worth of the business at the end of the period with that at the beginning. The net worth is calculated by subtracting the liabilities of the business from the assets. Assuming that no funds have been injected into or withdrawn from the business by the proprietors during the period, the increase in net worth represents the total profit earned. How the profit has been earned is analysed in this report.

The Balance Sheet report uses the posting and memorandum nominal account values that are stored specifically for Balance Sheet reporting. It also includes an accumulated balance from all Profit and Loss accounts. This represents the value of net profit/loss for the period.

This allows you to project your cash flow from the present year to five years in advance, based on your Sage 200 budgets. Values are per accounting period, not calendar month.

For each accounting period, you can see:

• Opening balance.

For the first period this is the actual balances for the nominal accounts, nominated as bank or cash accounts in the cash flow layout. The values used are the actual balance at the end of the period before the first period on the report.

For all other periods, the opening cash balance is the closing cash position from the previous period.

• Value for each income heading.

This value is based on the budgets for the nominal accounts associated with the income heading.

• Total cash receipts value (the sum of the values for all income headings).
• Value for each expenditure heading.

This value is based on the budgets for the nominal accounts associated with the income heading.

• Total cash paid out (the sum of the values for all expenditure headings).
• Closing balance.

This is the opening balance plus (total cash receipts less total cash paid out).

The Cash Flow report uses the actual balances for the nominal accounts, nominated as bank accounts in the cash flow layout.

Cashflow report and taxation

NI and PAYE

Nominal Ledger budgets for labour costs represent the gross wage. The NI and PAYE elements are typically paid to the government in a period after the one in which the net wage is paid to the employee.

You cannot split the budget in a period and apply a different period shift to a proportion of it. Cash flow reporting is suitable for businesses where wage costs remain relatively constant from period to period, however, if a business has considerable variance in wage costs from period to period, you can use the cash flow report as a basis and make adjustments to it, using Excel.

VAT

The budgets stored in the Nominal Ledger for income and expenditure are exclusive of VAT.

You cannot apply a VAT uplift to the budget values but you can ensure that the cash flow includes VAT by using report categories and specially created nominal accounts to support the cash flow report. Two examples are shown below. You can either show VAT separately on the cashflow report (Example 1) or include it with the cost and revenue accounts (Example 2).

Example 1 - Show a separate VAT figure on the report from the income and outgoings

Your nominal accounts and report categories are set up as follows:

Nominal Account	Report Category	Budget For Period
Revenue Type A	31	1000
Revenue Type B	32	2000
Output VAT	261	600
Cost Type A	41	500
Cost Type B	42	1000
Input VAT	262	300

The cashflow report for the period will show:

Balance B/F	10000
Revenue A (excluding VAT)	1000
Revenue B (excluding VAT)	2000
VAT On Sales	600
Total Income	3600
Cost Type A (excluding VAT)	500
Cost Type B (excluding VAT)	1000
VAT On Cost	300
Total Outgoing	1800
Balance C/F	11800

Example 2 - Include VAT figure with cost and revenue amounts

Your nominal accounts and report categories are set up as follows:

Nominal Account	Report Category	Budget For Period
Revenue Type A	31	1000
VAT Revenue Type A	311	200
Revenue Type B	32	2000
VAT Revenue Type B	321	400
Cost Type A	41	500
VAT Cost Type A	411	100
Cost Type B	42	1000
VAT Cost Type B	421	200

You need to create further nominal accounts to represent the VAT for each revenue and cost item. These VAT accounts can either use the same report category as the associated revenue and cost items or they could use separate codes as in the example. The report layout allows the report categories to be grouped so that either approach is supported.

The report categories with the same stem (for example, 41, 411) are amalgamated in the report calculations. The cashflow report for the period would show:

Balance B/F	10000
Revenue A	1200
Revenue B	2400
Total Income	3600
Cost Type A	600
Cost Type B	1200
Total Outgoing	1800
Balance C/F	11800