Understanding Financial Statements

Understanding Financial Statements

Financial Statements

As a business owner, you want to build the best foundation for success. Whether that means acquiring a loan, bringing on investors and raising capital, or understanding the financial dashboard of your business, it’s critical to have your financial statements in order.

There are four financial statements that offer an appropriate level of credibility and reliability to those evaluating your business. They include:

Income statement. The income statement, also known as the profit and loss statement, tracks all the money coming in and all the money going out. The statement factors in all expenses, revenue, and capital gains or losses.

Balance sheet. The balance sheet is a snapshot of your business financials with elements that reflect the day-to-day activities of the business. It includes all company assets, liabilities, and current net worth. Analyzing the balance sheet or a monthly basis can help you monitor your outstanding receivables, manage your inventory, and assess your ability to satisfy creditors and stockholders.

Statement of cash flows. This statement presents the cash inflows and outflows that occurred during the reporting period. It is a crucial tool for both business owners and potential investors since it highlights cash flow with respect to operating, investing, and financing activities. Also included are factors of depreciation, gains or losses on assets, and any changes in current assets or liabilities.

Equity statement. An equity statement details the finer financial points of a business including: preferred stock, contributed capital, common stock, and retained earnings. The report format varies, but can include the sale or repurchase of shares, dividend payments, and changes caused by reported profits or losses.

Why use a CPA for Financial Statement Preparation?

Preparing financial statements can be an intimidating task. Doing so often requires a certain kind of language and format that only regular users of financial statements are used to seeing. Knowing what information to disclose is just as important as knowing how to disclose it.

One of Sousa & Weber’s primary functions for many companies is to serve as an Outsourced Accounting Manager or Controller. Our experienced accounting managers will ensure that your financial statements adhere to the proper format that would add to the credibility of your financial reports and meet acceptable accounting principles.

Our team can also provide bookkeeper supervision so you have confidence in knowing that when you run an income statement, the numbers that show up are correct.

Financial statement preparation can be done monthly, quarterly or annually to help a business determine how it is doing currently and how performance compares to the previous year, thus helping make a better forecast for the future.

If you are interested in learning more about how one of our CPAs can help your financial statement preparation, get in touch with us today!

By |2019-10-08T23:46:23+00:00October 8th, 2019|Accounting Tips, Business Consulting, Small Business|Comments Off on Understanding Financial Statements
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