Reports: what each one answers

One report, one question

ByteBook's main reports are deliberately narrow. Each one answers a single question, and knowing which question saves a lot of time.

Report	The question it answers
Profit and loss	Did the business make money in this period?
Balance sheet	What does it own and owe, as at this date?
Trial balance	Do the accounts add up, and does the ledger balance?
General ledger	What happened in this account, entry by entry?
Money in and out	Where did the money come from and go?
Who owes what	Who owes us, and who do we owe?

Profit and loss

Income less expenses for a period. Income is recorded excluding GST, because GST collected was never the business's money.

One choice matters more than it looks. Expenses can be analysed by nature — what was bought, such as wages, rent, power — or by function — what the cost was for, such as cost of sales and administration. The standard requires one or the other, whichever provides information that is reliable and more relevant NZ IAS 1.99. ByteBook's chart of accounts is arranged by nature, which suits a small business and is easy to check.

Balance sheet

Assets, liabilities and equity at a date, and the arithmetic that has to hold:

assets − liabilities = equity

ByteBook computes that difference and states it on the page. If it is not zero, the page says so rather than hiding it. A balance sheet that does not balance is not a presentation problem; something is wrong in the ledger, and the figures are not usable until it is found.

The statement of financial position has to include certain line items where they are relevant, such as property, plant and equipment, inventories, trade and other receivables, cash, and trade and other payables NZ IAS 1.54. ByteBook groups its accounts to present them, and the general ledger is where you go when you want to see what is inside a line.

Trial balance and general ledger

The trial balance is every account with its balance, and the check that total debits equal total credits. It is the fastest way to find that something is wrong.

The general ledger is the detail. Pick an account and see every entry that touched it, in order. When a report figure looks wrong, this is where the answer is: not in the report, which is a sum, but in the rows that were summed.

Money in and out

Profit and cash are different things, and Money in and out is where the difference starts to show. ByteBook's report lists the money that actually arrived and left each month, and the balance it leaves in the bank. That is the raw material of a cash flow statement, not the finished statement.

A full statement of cash flows classifies every movement as operating, investing or financing NZ IAS 7.10, and is prepared using either the direct method or the indirect method NZ IAS 7.18. Transactions that involve no cash are left out of it and disclosed separately NZ IAS 7.43. A vehicle bought with a loan is the classic example: a real transaction, no cash, so it has to be disclosed rather than shown as a payment.

ByteBook does not build that classified statement. For a small business, the "money in and out" list plus the profit and loss and balance sheet is usually enough to answer the question. Where a full statement is needed — a lender, a sale, a formal set of financial statements — the classification is done from these reports.

Checking a report rather than trusting it

Every report in ByteBook is a sum of the entries in the ledger. The final assurance procedure, A14, goes further: it rebuilds the trial balance from the raw rows, checks debits equal credits, and recomputes the balance-sheet difference that the page reports.

This check exists because there are two different ways for a number to be wrong. The books can be wrong — a transaction coded to the wrong account — and the report can be wrong, through a defect in the program that builds it. The first is a bookkeeping problem; the second is a reporting problem, and no amount of careful coding will fix it.

A figure you cannot reproduce from the rows underneath it is not yet evidence.