Anne-Marie Saint-John, Alva, Long Island City, NY >
Financial Statements
Financial Statements provide information about the financial health of your company. Business owners, investors, creditors, and the Internal Revenue Service use these statements to know the performance of their business over a specified period of time. Some of the key reports are the Income Statement and Balance.
Income Statement
- The Income Statement is a formal financial statement, which summarizes the operations of a company (income and expenses) for a specific period of time, usually a month or a year.
- Small business owners use this to identify areas of their business that are over or under budget.
- The items that cause unexpected expenses, such as telephone, fax, mail, or supply expenses, can be identified accurately through this report.
- It can track dramatic increases in product return or cost of goods sold as a percentage of sales.
- It can also be used to determine income tax liability.
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Balances
The Balance Sheet will help you quickly realize the financial strength and capabilities of your business.
- You will be able to determine whether or not the business has the capacity to expand.
- You will have a clear idea of whether the business can easily handle the ebb and flow of income and expenses.
- You can determine whether the business should take immediate action to build up its cash reserves.
Balance sheets present the following information:
- Assets. Assets are anything that has value. Some examples of business assets are cash, accounts receivable, notes receivable, inventory, land, and equipment.
- Passives. Liabilities are the amounts that the business owes to others. Normally the biggest liabilities of a business are with the suppliers of goods and services. Liabilities are listed in chronological order of payment.
- Net worth of the owners or shareholders. The owner’s equity is what the business owes the owner, assuming all obligations (amounts owed) have been paid.
