If you are looking for information about how to prepare financial statements, then you have come to the right place. There are three important financial statements that every business needs. The first of the business financial statements is known as the income statement. The second is your balance sheet. After that, you need to prepare a cash flow statement. All companies, no matter how large or small, need to prepare financial statements for their business. It gives an overview of the performance of the company.
The income statement, also known as a profit and loss statement, is the one of the main business financial statements. It shows performance. You can see where money is coming in and where it is going out. Typically, this company financial statement is prepared quarterly or yearly. It starts by examining the overall gross revenue generated by the company’s activity during the time period. Then, all of the expenses are subtracted from the gross revenue in order to determine the profit or loss. This is the first document to examine when you prepare financial statements.
The balance sheet looks at all the assets and liabilities of the company. Assets are all of the properties or tangible things that the company owns. Liabilities, on the other hand, are items that detract from the overall value of the company.
Outstanding debt would be one example when you prepare financial statements. When you total up all of the assets and liabilities, the difference gives you the net worth. This statement is useful for determining a proper value of the company. It is also used in business valuation when buying a business.
Finally, there is a cash flow statement. When examining business financial statements, many people confuse this with the income statement. However, the two are different.
The cash flow statement allows you to see the movement of money. While a company can make a profit, it is still possible to run out of money during certain instances. When a business no longer has the cash to operate, it can come to a halt.
That is why it is necessary to prepare a cash flow statement. It shows the movement of money in and out of the business. It can also be used during business planning when it is necessary to determine projected cash flow.
So those are the three important documents in preparing consolidated financial statements. If you would like to discover more about how Tim Nash & Associates can help you prepare financial statements, give us call today.
