Your financial statements consist of your balance sheet, income statement and cash flow statements. You should compile financial statements on a regular basis to measure the health of your business. These statements are important if you ever need to seek a loan.
Your income statement calculates your company’s net profit or loss for a given period. Some people refer to this statement as a profit and loss statement or a P & L.
You can use the income statement to:
- Track revenues and expenses and compare the accounts to previous periods or budget to spot trends or errors.
- Pinpoint when you are going over budget on certain accounts..
- Project cash flow.
Your balance sheet gives you a clear picture of the health of your business. The balance sheet details the company’s assets, liabilities and owner equity. When you create a year-to-year comparison, your balance sheet can depict trends.
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