Overview:

In the system, nominal accounts are categorised and displayed in one of two main financial reports: the Profit and Loss report and the Balance Sheet. The Profit and Loss report uses revenue and expenses categories to calculate financial performance: Sales minus Purchases and Direct Expenses equals Gross Profit or Loss, and Gross Profit or Loss minus Overheads results in Net Profit or Loss. The Balance Sheet, on the other hand, displays assets, liabilities, and Capital and Reserve accounts. Notably, the current year’s result from the Profit and Loss report is included in the Capital and Reserve section of the Balance Sheet.

Impact of the Nominal Categories in the Financial Reports

1. Depending on which nominal category they are grouped in, the different nominal accounts stored in the system will be displayed in one or the other of the two main Financial Reports in the system, as follows:
2. Profit and Loss will only use revenue and expenses nominal categories for its calculations.
   • Sales – Purchases – Direct Expenses = Gross Profit /(Loss)
   • Gross Profit /(Loss) – Overheads = Net Profit /(Loss)
3. Balance Sheet will only display assets, liabilities and Capital and Reserve accounts. However, please notice that the current year´s result obtained from the Profit and Loss report will be included in the Capital & Reserve section of the Balance Sheet.

Learn more about balance sheet reports in Zumzum Financials.