Financial Statements: The Complete Guide for Saudi Businesses

Financial statements are accounting reports that summarize a business's financial position and the results of its operations over a given period. They help business owners, investors, and regulators understand the business's performance and make decisions, and most businesses prepare them in line with the International Financial Reporting Standards (IFRS).

There are three basic types: the income statement, which shows revenues, expenses, and net profit or loss over a period; the statement of financial position (balance sheet), which shows assets, liabilities, and equity at a specific point in time; and the statement of cash flows, which tracks operating, investing, and financing cash movements. The statement of changes in equity and the accompanying notes are often added to these.

The income statement measures performance over a period (a month, quarter, or year) through revenues and expenses to arrive at net profit or loss, while the balance sheet (statement of financial position) depicts the financial position at a single point in time through assets, liabilities, and equity. In other words, the first is a "movie" of a period, and the second is a "snapshot" on a specific date.

In Qoyod, you will find the income statement, the balance sheet, and the trial balance under the "Reports" menu. You can set the date range, use the "Advanced Analysis" feature to compare multiple periods or projects, and export the report to Excel. Note that their values are shown exclusive of VAT.

The trial balance is a statement that lists the balances of all debit and credit accounts at a specific point in time. Its purpose is to verify that transactions have been posted correctly and to detect errors by balancing total debits against total credits. It is a preparatory step that precedes the preparation of the financial statements, and if it does not balance, that indicates a recording error that must be corrected first.

Financial statement analysis turns numbers into decisions: through financial ratios (liquidity, profitability, and leverage) and period comparison, you learn how able your business is to meet its obligations, how profitable its activity is, and how efficiently it uses its resources. It is the basis for financing, expansion, and pricing decisions, and for evaluating performance before investors and banks.