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    Questions To Ask About Balance Sheet and Income Statement: Page 1 of 3

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    Faiz Ahmed
    The document provides guidance on key questions to ask about an organization's balance sheet and income statement. For the balance sheet, it identifies common assets like cash, receivables, and investments, as well as liabilities such as accounts payable. It recommends assessing factors that influence changes in asset and liability values over time. For the income statement, it suggests evaluating revenue sources and expenses to understand financial sustainability and risks.

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    Questions To Ask About Balance Sheet and Income Statement: Page 1 of 3

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    Faiz Ahmed
    38 views3 pages
    The document provides guidance on key questions to ask about an organization's balance sheet and income statement. For the balance sheet, it identifies common assets like cash, receivables, and investments, as well as liabilities such as accounts payable. It recommends assessing factors that influence changes in asset and liability values over time. For the income statement, it suggests evaluating revenue sources and expenses to understand financial sustainability and risks.

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    The document provides guidance on key questions to ask about an organization's balance sheet and income statement. For the balance sheet, it identifies common assets like cash, receivables, and investments, as well as liabilities such as accounts payable. It recommends assessing factors that influence changes in asset and liability values over time. For the income statement, it suggests evaluating revenue sources and expenses to understand financial sustainability and risks.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    38 views3 pages

    Questions To Ask About Balance Sheet and Income Statement: Page 1 of 3

    Uploaded by

    Faiz Ahmed
    The document provides guidance on key questions to ask about an organization's balance sheet and income statement. For the balance sheet, it identifies common assets like cash, receivables, and investments, as well as liabilities such as accounts payable. It recommends assessing factors that influence changes in asset and liability values over time. For the income statement, it suggests evaluating revenue sources and expenses to understand financial sustainability and risks.

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    You are on page 1of 3

    Questions to Ask About Balance Sheet and Income Statement

    Balance Sheet
    Definitions:
    Assets - What the charity owns or is owed
    Current Asset - Expected to be converted to cash or used with one year, e.g. GICs or
    other short-term investments
    Long-Term Asset - Expected to be converted to cash or used after one year, e.g. capital
    assets, longer term investments such as endowment funds
    Net Assets - Whats left after subtracting liabilities from assets
    1. Current Assets: Cash & Cash Equivalents
    Not necessarily the bank balance, as it could represent more than one bank account
    and short-term investments.
    Questions to Ask:
    What is included in the total cash and cash equivalents?
    If this value has increased or decreased significant from last month/year, why?
    2. Current Assets: Accounts receivable
    Amounts owed to (earned by) the charity from others.
    Questions to Ask:
    What is included in the total accounts receivable?
    When will these amounts be paid?
    Are there any amounts that have been outstanding for a long time?
    Are any amounts likely to be uncollectible or written off?
    If this value has increased or decreased significant from last month/year, why?
    3. Current Assets: Pre-paid expenses
    Expenses paid in the current month/year for supplies or services that will be used in
    a future month/year.
    Questions to Ask:
    What is included in the total pre-paid expenses?
    If this value has increased or decreased significant from last month/year, why?
    4. Long-term Assets: Capital (Land, Buildings, Equipment)
    Listed on financial statements at book value (amount of purchase; so, if donated, will
    show as zero value).
    Questions to Ask:
    What is market value of assets?
    Are assets insured for market value (not book value)?
    If this value has increased or decreased significant from last month/year, why?

    Page 1 of 3

    Questions to Ask About Balance Sheet and Income Statement


    5. Long-term Assets: Investments, e.g. endowment fund
    Unlike capital assets, long-term investments are recorded at market value.
    Questions to Ask:
    If this value has increased or decreased significant from last month/year, why?
    6. Current Liabilities: Accounts Payable & Accrued Liabilities
    A/P - Amount owed to vendors but not paid at the end of the fiscal period, e.g. items
    purchased/received but invoice not paid until later.
    Accrued Liability - Similar to A/P but not about purchases from vendors, e.g.
    vacation accrual.
    Questions to Ask:
    What are the amounts owing and to whom?
    If this value has increased or decreased significant from last month/year, why?
    7. Current Liabilities: Deferred Revenue/Grants
    Revenue received and deposited in the current month/year for services to be
    delivered in a future month/year.
    Questions to Ask:
    What is this revenue for?
    When will the funds be spent?
    If this value has increased or decreased significant from last month/year, why?
    TIP: If you have a lot of money in cash, it could be because you have a lot of
    deferred revenue. In other words, there should be a correlation between the amount
    of cash and deferred revenue.
    8. Long-Term Liabilities: Loans
    Amounts owing for long term loans.
    Questions to Ask:
    Why does the organization have a loan/loans?
    When will the loan be re-paid?
    If this value has increased or decreased significant from last month/year, why?
    9. Long-Term Liabilities: Obligations on Capital Leases
    Amounts owing for capital leases.
    Questions to Ask:
    What is being leased?
    When will the lease(s) end?
    If this value has increased or decreased significant from last month/year, why?

    Page 2 of 3

    Questions to Ask About Balance Sheet and Income Statement


    10. Net Assets
    Net worth of organization; similar to personal net worth.
    Questions to Ask:
    Is the organization net worth increasing or decreasing? Why?
    Cash, unrestricted and internally restricted assets represent an organizations
    free and clear money. Does this equal 3 to 6 months of committed operating
    expenses?
    E.G. Capital Assets and other long-term investments are not available. Externally
    restricted assets are not available.
    Income Statement
    1. Revenue
    Questions to Ask:
    Is revenue increasing or decreasing year-over-year? Why?
    How diversified is the funding, i.e. calculated % of each funding source.
    Is dependance on primary funder increasing or decreasing year-over-year.
    Which funding is single year? Multi-year? Is there a plan to replace funding
    before it ends?
    2. Expenses
    Questions to Ask:
    Salaries/Benefits usually will be an organizations largest expense. How many
    staff are permanent? Contract? In other words, what is the organizations risk if
    a contract is lost/cancelled?
    Rental/Leased Space - How long is the rental/lease commitment? How long
    does this commitment extend beyond the term of the primary funding source?
    Generally, is the increase/decrease in expenses from one month/year to the next
    proportionate to the increase/decrease in revenue?

    Page 3 of 3

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