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Accounting

The four financial statements: what each says, and the order to read them in

Three of them cover what happened during the period. One is a photograph of a single day. Read in the wrong order, they contradict each other.

7 min readTicuenta
The distinction that orders everything: the income statement, the cash flow statement and the statement of changes in equity are flow statements — they show what happened inside the period. The balance sheet is cumulative: a photograph at the cut-off date, with everything recorded up to that day.
3 of flowResults, cash, equity
1 cumulativeThe balance sheet
1 sourceAll four come from the entries

The order to read them in

  • Income statement — did it make a profit?

    The one almost everyone looks at first, and rightly: it says whether the period's trading left a profit. But on its own it does not say whether the business is healthy.

  • Balance sheet — what was it left with?

    What it has, what it owes and what belongs to the owners, on the last day of the period. This is where the signals the profit hides show up: the debt that grew, the stock that is not moving, the receivable that is eight months old.

  • Cash flow — where did the money come from and go?

    The one that answers the uncomfortable question: if we made a profit, why is there no money? It separates what trading generated from what was spent buying assets and from what came from loans or owners.

  • Changes in equity — what did the owners do?

    The least read, and the one that closes the circle: contributions, withdrawals, dividends and the transfer of the year's result. It explains why the equity on the balance sheet is not last year's plus the profit.

How they link to each other

ResultsNet profitGoes into equity…
EquityClosing balance…and balances the sheet
Cash flowStarts at the profitand ends at cash
All four are different views of the same entries, not separate reports.

Which is why an odd figure is never fixed in the report: it is fixed in the entry, or in the classification of the account feeding it.

The detail that throws half the statements in Costa Rica out. Until the closing entry is made, the year's result still lives in the income, cost and expense accounts: it is in no equity account. If there are earlier years left unclosed, the current year's opening equity does not include those profits, and the balance does not match last year's. That is not a report error: it is a pending close.

The one thing that has to be curated by hand

No software can guess which line an account you have just created belongs on. What decides where it appears is not the account code, but the section assigned to it.

An account called “sales commissions” can land in administrative expenses when it belonged in selling expenses. The bottom line does not change, but the operating profit does, and with it any comparison against last year. It is worth checking the section of each new account before handing over formal statements.

Account typePossible sections
AssetCurrent · Non-current
LiabilityCurrent · Non-current
EquityEquity
IncomeSales · Finance · Other · Share of associates
CostCost of sales
ExpenseSelling · Administrative · Finance · Other · Income tax
The cash flow statement carries a label of its own. Operating, investing or financing is a different classification from current/non-current. A short-term loan is a current liability on the balance sheet and financing in the cash flow. When the cash flow does not reconcile, it is almost always an account with this label set wrong.
From Ticuenta

All four, up to date, without generating them

They are calculated on the spot from the period's entries, with a comparative against last year and an Excel export. There is nothing to generate.

See how it works

About this article. The structure of the four statements follows the IFRS for SMEs (sections 4 to 7). Article 128 of the tax procedures code requires records to be kept in accordance with the standards adopted by the Costa Rican institute of public accountants.

Verified as of 24 September 2026. Rules change. This is information, not accounting or tax advice.

Sources: IFRS for SMEs (IFRS Foundation) Costa Rican Institute of Public Accountants

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