From Passion to Payday

Module 1 of 8

The three statements

Double entry, then the income statement, the balance sheet and the statement of cash flows, built from one company's first year.

Every set of financial statements starts as a list of transactions. This module takes Northside Coffee Ltd., a single-location cafe that opened on January 1, 2025. It builds the cafe's first-year statements from the journal up. By the end you can produce all three statements from raw entries and prove they agree with each other. Northside is a fictional company. Its numbers were designed so that every figure in every lesson ties to the same journal, and a script checks those ties each time the library is built.

  1. 1.1Double entry from zeroThe accounting equation, debits and credits, and how a journal becomes a trial balance.35 min
  2. 1.2The income statementRevenue recognition, cost of goods sold, operating expenses and the subtotals that tell you where profit comes from.40 min
  3. 1.3The balance sheetWhat a company has and owes at a single date, how items are classified, and three readings that tell you about safety.40 min
  4. 1.4The statement of cash flowsWhy profit and cash differ, the three sections, and the indirect and direct methods side by side.45 min
  5. 1.5How the three statements linkThe four connections that tie the statements together, and how to test any change by tracing it through all three.40 min

Templates in this module

Some templates are free to download. The full set of fourteen working files for modules 1 to 3 is in the Accounting and Finance Toolkit, Part 1.