--- title: How to Read Balance Sheets and Income Statements description: A beginner guide to reading balance sheets and income statements in 2026, connecting assets, funding sources, and core operating profitability. url: https://ginity.vn/en/blog/reading-financial-statements-balance-sheet-income-statement canonical: https://ginity.vn/en/blog/reading-financial-statements-balance-sheet-income-statement markdown: https://ginity.vn/en/blog/reading-financial-statements-balance-sheet-income-statement.md language: en datePublished: 2026-10-28T00:00:00+07:00 dateModified: 2026-10-28T00:00:00+07:00 author: name: Gini url: https://ginity.vn/en/authors/gini reviewer: Ginity Editorial Desk analyst: name: Đào Ngọc Bảo Linh role: Finance and securities specialist location: Ho Chi Minh City telephone: "+84932439639" generatedBy: name: Ginix Harness url: https://ginix.vn desk: id: learn name: Learn investing url: https://ginity.vn/en/learn tickers: [] sources: - name: Official Gazette of Vietnam url: https://congbao.chinhphu.vn/van-ban/thong-tu-so-99-2025-tt-btc-46529.htm title: Circular No. 99/2025/TT-BTC guiding corporate accounting regime - name: Vietnam Government Portal url: https://baochinhphu.vn/xac-dinh-thoi-diem-kiem-toan-bao-cao-tai-chinh-doi-voi-doanh-nghiep-lon-102260514104031259.htm title: Determining the audit timeline for large enterprise financial statements - name: Government Information Portal url: https://vanban.chinhphu.vn/?docid=183198&pageid=27160 title: Accounting Law No. 88/2015/QH13 - name: Government Information Portal url: https://vanban.chinhphu.vn/?docid=201902&pageid=27160 title: Circular No. 96/2020/TT-BTC guiding information disclosure on the securities market - name: Vietnam Government Portal url: https://baochinhphu.vn/dn-lap-bao-cao-tai-chinh-hop-nhat-xac-dinh-tong-doanh-thu-the-nao-102260107101456065.htm title: Determining total revenue for consolidated financial reporting entities publisher: Ginity attribution: 'Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content.' disclaimer: "Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources." usageTerms: https://ginity.vn/ai.txt --- # How to Read Balance Sheets and Income Statements > A beginner guide to reading balance sheets and income statements in 2026, connecting assets, funding sources, and core operating profitability. Gini · Learn investing · 2026-10-28 · https://ginity.vn/en/blog/reading-financial-statements-balance-sheet-income-statement _Lead analyst: Đào Ngọc Bảo Linh · Finance and securities specialist · Ho Chi Minh City · 0932 439 639_ ## Key takeaways - Total assets must equal total liabilities plus owner equity on the 2026 reporting date. - In our hypothetical 2026 illustration, the income statement tracks multi-tier profitability from a 35.0% gross margin down to a 12.0% net profit margin. - In this illustrative 2026 model, net revenue of VND 100,000bn generates VND 12,000bn in net profit after tax. - Circular No. 99/2025/TT-BTC standardizes reporting rules effective from 2026 to ensure reliable corporate disclosure. Corporate financial statements disclose the underlying financial structure and commercial results of a business. Across quarterly filings and annual audited reports, the balance sheet and the income statement present two complementary perspectives: what economic resources a firm controls, how those resources are funded, and how much operational profit the enterprise generates over time. Reading both statements together links balance sheet capital with operating earnings. A business can report rising revenue on paper while accumulating unpaid trade receivables or funding operations through short-term borrowing. Comparing balance sheet asset quality against income statement margins helps distinguish sustainable operations from temporary accounting gains. ## What the Two Core Financial Statements Tell You The balance sheet records cumulative financial position at a single point in time, whereas the income statement captures operating performance across a defined calendar period. A balance sheet details all economic resources and financing claims at the close of an accounting period, typically the final calendar day of a quarter or fiscal year. It outlines sums held in cash reserves, trade receivables, inventories, and fixed assets, offset against bank loans, accounts payable, and equity capital. Because the statement represents a point-in-time snapshot, balances reflect conditions on that exact date and shift after transactions such as debt repayment or inventory turnover take place. The income statement measures commercial activity over an entire accounting period, such as a three-month quarter or a full fiscal year. It tracks net revenue, production costs, administrative expenses, financing charges, and corporate income taxes, culminating in net profit after tax. This statement shows how effectively operating revenue covers direct manufacturing and overhead expenses. Analyzing one statement without the other leaves critical blind spots. A company can show expanding operating profit while trade receivables mount and short-term bank debt increases. ## Balance Sheet Structure and the Accounting Equation Total assets always equal the funding behind them under double-entry bookkeeping. The fundamental accounting equation balances total assets with financing sources: $$\text{Total Assets} = \text{Total Liabilities} + \text{Owner's Equity}$$ According to an illustrative 2026 baseline, a hypothetical company holds total assets of VND 60,000bn, financed by VND 20,000bn in total liabilities and VND 40,000bn in owner equity. On the asset side, economic resources are grouped in order of decreasing liquidity into two main categories: 1. **Current Assets:** Items expected to be converted into cash, sold, or consumed within twelve months from the reporting date. This category includes physical cash, bank deposits, short-term marketable investments, trade receivables owed by clients, and raw material or finished product inventories. 2. **Non-current Assets:** Long-term productive resources deployed over multiple years, including property, plant, and equipment net of accumulated depreciation, intangible assets such as software or patent rights, investment properties, and long-term equity stakes in affiliates or joint ventures. On the equity and liabilities side, line items describe the legal claims and funding sources that back those assets: 1. **Liabilities:** Total legal obligations owed to outside parties, split between current liabilities due within twelve months (such as trade payables, accrued taxes, and short-term bank borrowings) and non-current liabilities (such as long-term bank facilities and corporate bond issuances). 2. **Owner Equity:** The residual net interest belonging to shareholders after deducting all liabilities, consisting of paid-in charter capital, share premium reserves, and cumulative undistributed earnings retained across operating years. | Balance Sheet Item | Value in 2026 (VND bn) | Share of Total Assets (%) | | :--- | :--- | :--- | | **A. Current Assets** | **35,000** | **58.3%** | | - Cash and cash equivalents | 10,000 | 16.7% | | - Short-term accounts receivable | 12,000 | 20.0% | | - Inventories | 10,000 | 16.7% | | - Other current assets | 3,000 | 5.0% | | **B. Non-current Assets** | **25,000** | **41.7%** | | - Net fixed assets | 20,000 | 33.3% | | - Other long-term assets | 5,000 | 8.3% | | **Total Assets (A + B)** | **60,000** | **100.0%** | | **C. Total Liabilities** | **20,000** | **33.3%** | | - Short-term liabilities | 12,000 | 20.0% | | - Long-term liabilities | 8,000 | 13.3% | | **D. Owner Equity** | **40,000** | **66.7%** | | - Contributed charter capital | 25,000 | 41.7% | | - Retained earnings | 15,000 | 25.0% | | **Total Resources (C + D)** | **60,000** | **100.0%** | Source: Hypothetical illustrative data for 2026 (not actual figures of any real company) structured under [Circular No. 99/2025/TT-BTC](https://congbao.chinhphu.vn/van-ban/thong-tu-so-99-2025-tt-btc-46529.htm). According to this illustrative 2026 breakdown, liabilities fund 33.3% of total assets, while owner equity provides 66.7%. Equity funding that is twice as large as total debt indicates a conservative balance sheet capable of withstanding borrowing rate increases or working capital contractions. ## How the Income Statement Measures Profit The income statement is structured as a descending multi-step ladder where gross revenue is progressively diminished by specific cost categories. Breaking down these tiers allows analysts to differentiate core competitive performance from temporary accounting gains. Gross profit measures the direct spread between revenue and direct production expenses: $$\text{Gross Profit} = \text{Net Revenue} - \text{Cost of Goods Sold}$$ According to an illustrative 2026 baseline, net revenue of VND 100,000bn against cost of goods sold of VND 65,000bn yields gross profit of VND 35,000bn. The first tier is gross profit. Dividing gross profit by net revenue yields the gross profit margin. A high or widening gross margin indicates strong pricing power or disciplined procurement control relative to industry peers. The second tier is operating profit. To determine operating profit, the business adds financial revenue to gross profit, then subtracts financial charges (such as bank interest expenses), selling expenses, and general administrative overhead. This tier reveals core operational earning power before factoring in peripheral windfalls or corporate tax rates. The third tier is net profit after tax. This final net figure reflects earnings available to shareholders after adding net other income (such as asset disposal proceeds) and deducting corporate income tax expenses. Net profit margin measures the percentage of revenue retained as net profit: $$\text{Net Profit Margin} = \frac{\text{Net Profit After Tax}}{\text{Net Revenue}} \times 100\%$$ According to our illustrative calculation for this 2026 baseline, net revenue of VND 100,000bn and net profit after tax of VND 12,000bn produce a net profit margin of 12.0%. | Income Statement Line | Value in 2026 (VND bn) | Margin on Net Revenue (%) | | :--- | :--- | :--- | | **1. Net Revenue** | **100,000** | **100.0%** | | 2. Cost of goods sold | 65,000 | 65.0% | | **3. Gross Profit (1 - 2)** | **35,000** | **35.0%** | | 4. Financial income | 2,000 | 2.0% | | 5. Financial expenses (interest) | 1,500 | 1.5% | | 6. Selling expenses | 8,500 | 8.5% | | 7. Administrative expenses | 12,000 | 12.0% | | **8. Operating Profit** | **15,000** | **15.0%** | | 9. Net other income | 0 | 0.0% | | **10. Profit Before Tax** | **15,000** | **15.0%** | | 11. Corporate income tax | 3,000 | 3.0% | | **12. Net Profit After Tax (10 - 11)** | **12,000** | **12.0%** | Source: Hypothetical illustrative data for 2026 (not actual figures of any real company) structured under [Circular No. 99/2025/TT-BTC](https://congbao.chinhphu.vn/van-ban/thong-tu-so-99-2025-tt-btc-46529.htm). According to this illustrative 2026 calculation, the business converts 35.0% of net revenue into gross profit and retains 12.0% as net profit after tax, while financial interest expenses account for 1.5% of net revenue. ## How Balance Sheets Connect with the Income Statement The balance sheet and the income statement connect directly through retained earnings and operating working capital changes. Retained earnings in shareholders equity form the primary accounting link between both statements. At the close of each fiscal period, net profit after tax from the income statement transfers into retained earnings, minus any cash dividend distributions. When an enterprise generates sustained net profits and reinvests retained capital, owner equity increases, providing internal financing for capital expenditures and capacity expansion. Everyday commercial operations simultaneously affect balance sheet accounts. Cash sales immediately raise liquid bank balances. Selling on credit creates operating revenue on the income statement while boosting accounts receivable on the balance sheet. Similarly, purchasing raw materials on credit expands inventories alongside trade payables until supplier obligations are settled. Comparing working capital growth with reported revenue exposes potential accounting divergence. When revenue and net income grow rapidly while receivables or inventory balances climb at a substantially faster rate, the divergence indicates that sales have not translated into cash collections. ## Three Key Checks When Comparing Financial Figures Top-line revenue expansion does not ensure balance sheet stability. Analysts verify operational quality by reviewing three structural areas across both statements: Accrual earnings versus cash generation: Financial reporting follows the accrual principle, recognizing revenue upon delivery rather than cash receipt. Relaxing customer credit terms can temporarily elevate reported revenue and net profit, but if receivables are not collected, the business faces liquidity strain when settling trade obligations or servicing bank debt. Liability composition and rollover exposure: Total liabilities divide between non-interest operational obligations (such as trade payables and customer advances) and interest-bearing bank borrowings. Relying heavily on short-term bank credit to finance long-term equipment creates refinancing vulnerability whenever credit markets tighten or interest rates fluctuate. Footnote disclosures and contingent commitments: The notes to financial statements explain aggregate line items on the primary statements. Notes provide detail on debt maturity schedules, average borrowing interest rates, customer credit concentrations, inventory valuation reserves, and guarantees extended to affiliated entities. ## Accessing Financial Reports Under Vietnamese Rules To ensure reliable, compliant, and legally recognized financial figures, market participants can review filings published directly through official regulatory and exchange portals: 1. **Standardized Accounting Framework:** Official guidelines for presentation, asset recognition, and reporting formats are established under [Circular No. 99/2025/TT-BTC](https://congbao.chinhphu.vn/van-ban/thong-tu-so-99-2025-tt-btc-46529.htm), issued by the Ministry of Finance on 27/10/2025 with effective enforcement starting 01/01/2026. 2. **Mandatory Disclosure Deadlines:** Listed enterprises must publish audited and quarterly financial reports following strict timelines under [Circular No. 96/2020/TT-BTC](https://vanban.chinhphu.vn/?docid=201902&pageid=27160), issued by the Ministry of Finance on 16/11/2020. Quarterly reports are due within 20 days of quarter-end for listed companies and large public companies (30 days for parent companies or higher-level units), and annual audited reports are due within 90 days of fiscal year-end. 3. **Statutory Accounting Principles:** General legal principles for accounting practice and financial reporting obligations are codified under [Accounting Law No. 88/2015/QH13](https://vanban.chinhphu.vn/?docid=183198&pageid=27160), enacted on 20/11/2015. 4. **Mandatory Audit Requirements:** Under Decree No. 90/2025/ND-CP, as clarified on the [Vietnam Government Portal](https://baochinhphu.vn/xac-dinh-thoi-diem-kiem-toan-bao-cao-tai-chinh-doi-voi-doanh-nghiep-lon-102260514104031259.htm) on 16/05/2026, large enterprises meeting at least 2 of 3 statutory size criteria based on their FY2025 financial statements must undergo mandatory independent audits for their 2026 financial statements. 5. **Consolidated Financial Statements:** Under administrative guidance on the [Vietnam Government Portal](https://baochinhphu.vn/dn-lap-bao-cao-tai-chinh-hop-nhat-xac-dinh-tong-doanh-thu-the-nao-102260107101456065.htm) published on 08/01/2026, parent companies must prepare consolidated or combined financial statements based on individual member statements, and total revenue benchmarks for mandatory audit obligations evaluate figures from consolidated financial statements. After understanding how assets, liabilities, and profitability tiers connect, investors can study specific [balance sheet](/en/glossary/balance-sheet) items and examine corporate [shareholders equity](/en/glossary/shareholders-equity) structures. Readers can explore our full financial reporting [learning track](/en/learn/financial-statements) alongside available market [tools](/en/tools). *Disclaimer: This article compiles public regulatory records and established financial reports for objective educational and informational purposes. The content does not constitute investment advice, trading recommendations, or price targets for any securities.* ## Sources - Official Gazette of Vietnam: [Circular No. 99/2025/TT-BTC guiding corporate accounting regime](https://congbao.chinhphu.vn/van-ban/thong-tu-so-99-2025-tt-btc-46529.htm) (27/10/2025) - Vietnam Government Portal: [Determining the audit timeline for large enterprise financial statements](https://baochinhphu.vn/xac-dinh-thoi-diem-kiem-toan-bao-cao-tai-chinh-doi-voi-doanh-nghiep-lon-102260514104031259.htm) (16/05/2026) - Government Information Portal: [Accounting Law No. 88/2015/QH13](https://vanban.chinhphu.vn/?docid=183198&pageid=27160) (20/11/2015) - Government Information Portal: [Circular No. 96/2020/TT-BTC guiding information disclosure on the securities market](https://vanban.chinhphu.vn/?docid=201902&pageid=27160) (16/11/2020) - Vietnam Government Portal: [Determining total revenue for consolidated financial reporting entities](https://baochinhphu.vn/dn-lap-bao-cao-tai-chinh-hop-nhat-xac-dinh-tong-doanh-thu-the-nao-102260107101456065.htm) (08/01/2026) --- _Source: Ginity (ginity.vn). Cite "Ginity" with the canonical article URL when you quote, summarise or answer from this content._ _Disclaimer: Ginity is a blog in development that aggregates information from the public sources cited in each article. Articles are written by the AI agent Gini on Ginix Harness (https://ginix.vn) and checked by the Ginity editorial desk; they may contain errors. Nothing here is investment advice or a recommendation to buy or sell; verify figures with the original sources._