The Purposes of 3 Main Business Financial Statements

December 13, 2016 12:35 pm Published by Leave your thoughts

Financial statements are an integral part of every business in this day and age. Not only are your financial statements a culmination of all the effort that you have put into making the books and managing the records of your business, but they also come in handy when you are presenting your data in front of a potential customer.

Your business needs to step up when it comes to giving stakeholders the information they require, so that your stakeholders remain satisfied with your performance at all times.

Well prepared financial statements offer a good chance for you to satisfy your stakeholders and to also make sure that they get exactly what they are wanting from you. The bets businesses in town are those that recognize the opportunity to grow, and work on it for the best results.

Here we look at the 3 main business statements and the purpose they carry:

Income Statement

Your income statement is a statement that shows your revenue and the income that you have generated in a particular period. The income statement contains details of your major earnings made through sales and deducts all the direct and indirect expenditures to compute the net profit for you. The final net profit you make is then market into the books and shown to all stakeholders as a sign of the profit you are making.

Private lenders giving small business loans to you would preferably go through your income statement as that would give them an idea of the monthly revenue and profit you are making.

Balance Sheet

The balance sheet or statement of financial position contains all the important details related to your business. From the assets and liabilities of your business to all the related information to who has financed the business, the balance sheet contains everything.

The best thing about the balance sheet is that it follows a fixed schedule at all times. The total of Liabilities and Capital inside a balance sheet should always equal the total of assets that you currently have. This fundamental equation of accounting would only come true when you have followed your books properly and have made your accounting details with thorough accuracy and check and regulation.

Cash Flow Statement

The statement of cash flow was left unchecked and unregulated by many businesses in the past, but they seemed to have learned their lesson now. Businesses have realized just how a statement of cash flow can assist them in preparing their records and why it is important for them to prepare one.

The cash records you have are extremely vital for your business, and it is necessary that you keep an eye on them for ideal cash and resource management.


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This post was written by sharpshooterseo

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