The two financial statements Aethelgard produces from your day-to-day entries — the Profit & Loss and the Balance Sheet — are the same statements your accountant prepares at year-end. The difference is that yours are live, on your machine, and tied directly to the underlying transactions.
This guide is for principals, founders, and family-office operators who want to use them as decision tools rather than compliance artefacts.
The Profit & Loss
The P&L answers a single question: how did we do over a period? Aethelgard generates it for any date range you select.
It is structured the way IFRS expects:
- Revenue. Money earned in the period, regardless of when it was received.
- Cost of sales. Direct costs of producing the revenue. Aethelgard distinguishes these from operating expenses so gross margin is visible.
- Operating expenses. Overhead — software, rent, professional fees, salaries.
- Below-the-line items. Interest, tax, depreciation, amortisation. Separated so operating performance is not obscured by financing or capital-allocation choices.
- Net income. What is left.
What to look for
- Trend, not level. A single month’s number tells you almost nothing. Compare the period to the same period last year, or to a rolling average. Aethelgard lets you generate the same report across any two date ranges.
- Gross margin. Compute revenue minus cost of sales, divided by revenue. A falling gross margin means either pricing pressure or rising input costs — both worth investigating before the operating line tells you something is wrong.
- Where the money went. When operating expenses look high, drill into the line. Aethelgard’s reports are interactive: click any figure and it opens the underlying ledger entries filtered to that account and period.
The Balance Sheet
If the P&L is a film of the period, the Balance Sheet is a still photograph at a date. It tells you what the entity owns, what it owes, and what the residual is.
The identity is always the same: Assets = Liabilities + Equity.
What to look for
- Liquidity. Current assets divided by current liabilities. Below 1.0 means short-term obligations exceed short-term resources — a working-capital warning.
- Leverage. Total liabilities relative to equity. High leverage amplifies returns in good periods and amplifies losses in bad ones. There is no universally correct ratio; the right one depends on the cash-flow stability of the underlying business.
- Inter-company balances. If you run multiple entities, their internal loans should net to zero on the consolidated Balance Sheet. Aethelgard handles this automatically when accounts are flagged as inter-company; see the Multi-entity consolidation guide.
Drilling in
Aethelgard’s reports are not static PDFs. Every figure on the P&L and Balance Sheet is a link.
- Click a line — say, Legal & Professional Fees — and the General Ledger opens, scoped to that account and the period.
- From there you can see every individual entry that contributed to the total, with the date, counter-party, and any attached document.
This is what turns the reports from compliance documents into management information.