1. Income Statement
The income statement shows how well we have performed during the year. This statement is prepared on an accrual basis, which means that all revenue and costs for the year are recognised even though the income may not yet be received or expenses not yet paid. The statement lists the sources of the Melbourne City Council's revenue under income headings (such as rates, grants and parking fines) and the expenses incurred in running Melbourne City Council during the year (such as employee costs and contract payments).

Expenses included in the income statement relate only to our operations (our day-to-day running costs). Costs associated with the purchase or building of assets are not included in the Income Statement. However, depreciation (the value of an asset that is used up during the year) is included.

The key figure to look at is the 'surplus for the year' figure. A surplus means that our revenue was greater than our expenses. Being in surplus for the year is equivalent to being in profit. For 2008-09, the income statement is in surplus. This means that in 2008-09, Melbourne City Council created sufficient funds to replace infrastructure assets when they needed to be replaced and met all our expenditure commitments.

2. Balance Sheet
The balance sheet shows the assets the Melbourne City Council owns and what it owes (its liabilities) as at 30 June, 2009.

Assets and liabilities are separated into 'current' and 'non-current'. Current assets or liabilities will fall due in the next 12 months, such as money owed to Melbourne City Council by ratepayers (a current asset), or the amount provided to pay employees when they take annual leave (a current liability).

Non-current assets and liabilities will fall due beyond 12 months, or will not be converted to cash in the next 12 months, such as roads owned by Melbourne City Council (a non-current asset), or the amount paid to employees when they take long service leave (a noncurrent liability).

Assets, with the exception of assets held at cost, are reviewed each year to ensure they reflect their 'fair' value. The bottom line of the balance sheet is net assets. This is the net worth of Melbourne City Council, built up over many years.

As at June 2009, our balance sheet shows that the Melbourne City Council is in a sound financial position. Our current assets are 2.3 times our current liabilities. This means that for every one dollar of current liabilities, Melbourne City Council has $2.31 of current assets to pay the debt. This demonstrates Melbourne City Council has sufficient funds on hand to pay liabilities as they fall due.

3. Statement of Cash Flows
The statement of cash flows summarises our cash receipts and payments for the financial year and shows the net increase or decrease in cash held by Melbourne City Council. The statement of cash flows represents cash 'in hand', whereas the income statement is prepared on an accrual basis (including money not yet paid or spent). This means the values in both statements may differ.

Melbourne City Council's cash arises from, and is used in, three main areas:

• the 'cash flows from operating activities' section summarises all income and expenses relating to Melbourne City Council's delivery of services
• the 'net cash provided by operating activities' figure must be in a surplus to ensure we can maintain our day-to-day operations and provide funds for future community assets.
• the 'cash flows from financing activities' represents any proceeds from borrowings Melbourne City Council has received during the year.
• the 'cash flows from investing activities' refers to the Melbourne City Council's capital works expenditure or other long-term revenue producing assets, as well as money received from the sale of assets.

4. Statement of Changes in Equity
The statement of changes in equity summarises changes in Melbourne City Council's net worth. Our net worth can change as a result of:

• a surplus (profit) or deficit (loss) recorded in the income statement;
• the use of monies from Melbourne City Council's reserves (such as the public open space reserve, used to fund capital projects)
• an increase in the value of non-current assets resulting from a revaluation of those assets.

With re-valued assets, the increased value amount is transferred to an Asset Revaluation Reserve until the asset is sold.

The Note Column
Our financial statements contain a note column, with additional information relating to an item. Notes are particularly useful where there has been a significant change from the previous year's comparative figure.