Financial Reports — Trial Balance, P&L, Balance Sheet

The ultimate purpose of recording every transaction in an ERP system is to produce financial reports that tell you where your business stands. Udyamo ERP Lite generates four key financial reports directly from your accounting data: the Trial Balance, Profit & Loss statement, Balance Sheet, and Cash Flow Statement. Together, these reports answer the fundamental questions — are the books in balance, is the business profitable, what does the business own and owe, and where did the cash go?

For Indian manufacturing businesses, these reports also serve regulatory purposes. They align with the formats prescribed by the Companies Act, 2013 and Indian Accounting Standards (Ind AS), and they follow the Indian financial year running from April to March. Understanding how to generate and read these reports is essential for business owners, accountants, and auditors alike.

What You Will Learn

• How the Trial Balance verifies that your books are in balance
• How to read a Profit & Loss (Income Statement) with manufacturing considerations
• How the Balance Sheet presents assets, liabilities, and equity at a point in time
• How the Cash Flow Statement tracks actual cash movement
• How the report_group field on accounts maps data to financial statements
• How to generate each report in Udyamo ERP Lite with period and date selection
• How to interpret the output for decision-making

Prerequisites

• An understanding of double-entry bookkeeping and the five account types (covered in Chapter 31: Accounting Fundamentals)
• A configured Chart of Accounts with transactions posted during the selected period (covered in Chapter 32: Chart of Accounts)
• Familiarity with ledger entries and automatic postings (covered in Chapter 34: Ledger Entries)

How Accounts Map to Financial Reports

Every account in Udyamo ERP Lite carries a report_group attribute that determines which section of which financial report it appears in. When you set up or modify an account in the Chart of Accounts, the report_group controls placement:

If an account is assigned to the wrong report group, it will appear in the wrong section of your financial statements. Review your Chart of Accounts periodically to ensure correct classification.

Tip: When creating new accounts, always verify the report group. A common mistake is classifying "Factory Rent" as an operating expense when it should be part of manufacturing overhead under Cost of Goods Sold. The distinction directly affects your gross profit calculation.

Trial Balance

The Trial Balance is the simplest and most fundamental financial report. It lists every account in your Chart of Accounts along with its debit or credit balance as of a selected date. Its primary purpose is verification: if total debits equal total credits, your books are in balance.

What the Trial Balance tells you:

• The closing balance of every account — bank, receivables, payables, revenue, expenses
• Whether the books are mathematically in balance (total debits = total credits)
• A quick snapshot of where money sits across the organization

What the Trial Balance does not tell you:

• Whether transactions are correctly classified (a posting to the wrong account will not break the balance)
• Whether revenue exceeds expenses (that is the Profit & Loss statement's job)
• The financial position in structured format (that is the Balance Sheet's job)

Step-by-step: Generating the Trial Balance

1. Navigate to Reports > Trial Balance from the sidebar.
2. Select the period — choose the start date and end date. For a full financial year, select 1 April to 31 March.
3. Click Generate Report.
4. The report displays a table with columns for Account Name, Account Code, Debit Balance, and Credit Balance.
5. Verify that the Totals row at the bottom shows equal debit and credit amounts.

Warning: If the trial balance does not balance, do not proceed with other financial reports until the discrepancy is resolved. An imbalance indicates a data issue — possibly a journal entry that was partially saved or a manual adjustment that was entered incorrectly. Check recent journal entries for errors.

Profit & Loss (Income Statement)

The Profit & Loss statement (also called the Income Statement) answers the question: did the business make a profit or a loss during a given period? It calculates the difference between all income earned and all expenses incurred.

Structure of the P&L statement:

Manufacturing P&L considerations:

For a manufacturing business, the COGS calculation is more involved than for a trading company. COGS includes not just the purchase price of materials, but also the cost of converting those materials into finished goods:

• Raw material consumption: Opening stock + Purchases - Closing stock of raw materials
• Direct labour: Wages paid to workers directly involved in production
• Manufacturing overheads: Factory rent, power, machine maintenance, consumables

Udyamo ERP Lite derives these figures from the accounts classified under the "Cost of Goods Sold" report group. If your manufacturing cost accounts are correctly set up, the P&L statement will show an accurate gross profit that reflects true production economics.

Step-by-step: Generating the P&L statement

1. Navigate to Reports > Profit & Loss from the sidebar.
2. Select the period — typically the current financial year (April to March) or a specific quarter.
3. Click Generate Report.
4. The report displays the structured P&L with revenue, COGS, gross profit, operating expenses, and net profit.
5. Review the gross profit margin (Gross Profit / Revenue) to assess production efficiency.

Tip: Compare P&L statements across periods to spot trends. If gross profit margin is declining while revenue is growing, your production costs are rising faster than your prices — a signal to investigate raw material costs or manufacturing efficiency.

Balance Sheet

The Balance Sheet presents the financial position of the business at a specific point in time. Unlike the P&L (which covers a period), the Balance Sheet is a snapshot: what the business owns, what it owes, and what remains for the owners, as of a particular date.

The fundamental equation:

Assets = Liabilities + Equity

Structure of the Balance Sheet:

Step-by-step: Generating the Balance Sheet

1. Navigate to Reports > Balance Sheet from the sidebar.
2. Select the as-of date — the date for which you want the snapshot. Typically 31 March for year-end, or the current date for an interim view.
3. Click Generate Report.
4. The report displays assets on one side and liabilities plus equity on the other.
5. Verify that the two sides balance. If they do not, review your trial balance for discrepancies.

Tip: For manufacturing businesses, pay close attention to the inventory line items on the balance sheet. High raw material inventory relative to production volume may indicate overstocking. High finished goods inventory relative to sales may signal slow-moving products. The balance sheet reveals capital tied up in stock that could be deployed elsewhere.

Cash Flow Statement

The Cash Flow Statement tracks the actual movement of cash into and out of the business during a period. While the P&L shows profitability on an accrual basis, the Cash Flow Statement shows liquidity — how much cash the business actually generated or consumed.

The three sections of cash flow:

The sum of all three sections gives the net increase or decrease in cash during the period. This should reconcile with the actual change in bank and cash balances.

Step-by-step: Generating the Cash Flow Statement

1. Navigate to Reports > Cash Flow from the sidebar.
2. Select the period — start date and end date.
3. Click Generate Report.
4. Review each section: operating, investing, and financing.
5. Check the net cash position at the bottom and compare it to your bank balance.

Warning: A profitable business can still run out of cash. If your customers pay in 60 days but your vendors demand payment in 30 days, you have a cash flow gap. The Cash Flow Statement makes this visible. Use it alongside the P&L, not as a replacement.

The Indian Financial Year and Report Periods

All financial reports in Udyamo ERP Lite default to the Indian financial year (April to March) as configured in your organization settings. When you open any report, the system pre-selects the current financial year as the default period.

Common reporting periods for Indian manufacturing businesses:

Tip: Generate the Trial Balance at the end of every month before filing GST returns. This confirms that all transactions for the month are recorded and the books are in balance. Catching errors monthly is far easier than discovering them at year-end.

Tips & Best Practices

Tip: Share the P&L and Balance Sheet with your chartered accountant quarterly, not just at year-end. Early review allows time to correct misclassifications and optimize tax planning.

Tip: When reviewing the Balance Sheet, calculate key ratios: Current Ratio (Current Assets / Current Liabilities) and Debt-to-Equity Ratio (Total Liabilities / Total Equity). These ratios are often required by banks when you apply for working capital loans or term loans.

Tip: Use the Cash Flow Statement to plan capital expenditure. If operating cash flow is consistently positive and growing, you have the capacity to invest in new machinery or expand the factory. If it is negative, focus on collections and cost control before committing to new investments.

Warning: Financial reports are only as accurate as the underlying data. If transactions are not recorded, recorded in the wrong accounts, or recorded in the wrong period, the reports will be misleading. Establish a discipline of timely and accurate data entry.

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