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How to Prepare Financial Statements for Your Business in Pakistan

How to Prepare Financial Statements for Your Business in Pakistan


Financial statements are essential tools for businesses in Pakistan as they provide a snapshot of the company’s financial health and performance. These statements help business owners, investors, lenders, and other stakeholders evaluate the company’s profitability, liquidity, and overall financial position. This article will provide a detailed guide on how to prepare financial statements for your business in Pakistan.


Balance Sheet: A balance sheet is a financial statement that provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time. It shows what the company owns, owes, and the residual value for the shareholders.

Income Statement: Also known as a profit and loss statement, an income statement summarizes a company’s revenues, expenses, gains, and losses over a specific period. It showcases the company’s ability to generate profits and its overall financial performance.

Cash Flow Statement: A cash flow statement tracks the inflow and outflow of cash within a company during a particular period. It provides insights into the company’s operating activities, investing activities, and financing activities.


Balance Sheet Example:

XYZ Company
As of December 31, 2022


Current Assets:
Cash and Cash Equivalents: PKR 500,000
Accounts Receivable: PKR 200,000
Inventory: PKR 300,000

Fixed Assets:
Property, Plant, and Equipment: PKR 1,500,000
Less: Accumulated Depreciation: PKR 500,000
Net Property, Plant, and Equipment: PKR 1,000,000

Total Assets: PKR 2,000,000

Liabilities and Shareholders’ Equity:
Current Liabilities:
Accounts Payable: PKR 150,000
Short-term Loans: PKR 100,000

Long-term Liabilities:
Long-term Loans: PKR 500,000

Shareholders’ Equity:
Share Capital: PKR 1,000,000
Retained Earnings: PKR 250,000

Total Liabilities and Shareholders’ Equity: PKR 2,000,000

Income Statement Example:

XYZ Company
For the Year Ended December 31, 2022

Sales: PKR 1,000,000

Cost of Goods Sold: PKR 500,000
Salaries and Wages: PKR 200,000
Rent Expense: PKR 50,000
Utilities Expense: PKR 20,000
Advertising Expense: PKR 30,000

Net Income: PKR 200,000

Cash Flow Statement Example:

XYZ Company
For the Year Ended December 31, 2022

Operating Activities:

Net Income: PKR 200,000
Depreciation: PKR 100,000
Increase in Accounts Receivable: PKR 50,000
Decrease in Inventory: PKR 20,000

Investing Activities:

Purchase of Property, Plant, and Equipment: PKR 200,000

Financing Activities:

Increase in Long-term Loans: PKR 100,000
Repayment of Short-term Loans: PKR 50,000
Payment of Dividends: PKR 30,000

Net Increase in Cash: PKR 150,000

Case Studies:

ABC Corporation:
ABC Corporation, a manufacturing company in Pakistan, prepares its financial statements annually. The balance sheet reveals the company’s significant investments in machinery and equipment. The income statement reflects increased sales and decreased expenses, resulting in higher profits. The cash flow statement shows positive cash flows from operating activities, indicating good financial health.

DEF Enterprises:
DEF Enterprises, a retail business in Pakistan, prepares financial statements quarterly. The balance sheet exhibits high levels of inventory and accounts receivable, indicating potential liquidity challenges. The income statement reveals declining revenues due to decreased customer demand. The cash flow statement highlights negative cash flows from operating activities, signaling financial difficulties.


Preparing financial statements is crucial for businesses in Pakistan to assess their financial performance and make informed decisions. The balance sheet, income statement, and cash flow statement provide valuable insights into a company’s assets, liabilities, revenues, expenses, and cash flows. By following the guidelines and using the examples provided in this article, business owners can effectively prepare accurate financial statements to evaluate their business’s financial health and plan for future growth.