Great! You have managed to save some money and now you are ready to invest it. You have carefully read our December article on investing and have decided to buy shares.
You remember about diversification and dollar cost averaging. And you have started looking at various company reports to find out which companies are worth investing in. But do all these numbers make sense?
Companies which are listed on the stock market publish their accounts. The three main financial documents are the Income Statement, the Balance Sheet and the Cash Flow Statement. These are included in a company report.
All the transactions of a company are recorded in accounts, using the 'double entry' technique. This allows precise tracking - where the money comes from and what it has been used to.
For example, when a shop sells something and the buyer pays cash, the transaction is recorded in two accounts - 'sales' and 'cash'.
Big companies can have millions of transactions in their accounts system.