As I discussed in the previous post, financial statements are the report cards of business.
Below is a summary of the standard financial statements that you should use to monitor the progress of your company:
- Income Statement – Shows the revenue, expenses, and the profit/loss of your company for a specific period of time.
- Balance Sheet – Shows the financial position of your company on a specific date. The balance sheet includes assets (cash, accounts receivable, property, and equipment), liabilities (accounts and notes payable, and taxes payable), and owners equity (contributed capital and retained earnings, which is the profit of your company that has not been distributed to the owners).
- Cash Flow Statement – Shows the change in your company’s cash balance(s) for a specific period of time. The cash flow statement is broken down into cash flows from operating activities, investing activities, and financing activities (remember “Happiness is a Positive Cash Flow”!).
- Statement of Owner’s Equity – Shows the equity you have in your company on a specific date. Equity is basically the value of the investment you have in your company.
Over the next few weeks, I’ll discuss each financial statement in more detail.
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