Common Financial Statements For Small Enterprises
Experienced small business enterprises as well as beginners are familiar with the term accounting financial statements, also known as financial reports, that constitute one of the company’s main “supporting collars.” The reports, which are presented to different interested parties for different purposes, such as potential investors, financial and governmental institutions and others, require accuracy from the accountants’ part.
To manage the complicated process of preparing financial statements, they are differentiated in four common types: balance sheets, income statements, statements of capital and cash-flow. They should match standards presented by local or international standard companies, like Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), Financial Accounting Standard Broad (FASB) and others.
As for the types, let’s begin with the Balance Sheet. This shows the company’s assets, its liabilities and the owner’s equity. The following equation is suggested: liabilities + net equity = assets. More important are the indicators of liabilities and assets; if the first ones exceed the latter, then in case of paying off the debts the outcome will be negative. And as it’s based on the aforementioned balance between assets and liabilities, it’s called a balance sheet.
Income statements, also called Profit and Loss (P&L) statements, indicate company income or loss resulted from its business operations in a given interval of time. These financial statements are very important as they summarize the company’s whole operation, including whether for instance, expenses exceeded income, or vice-versa (net income or net loss).
The Statement of Capital or retained earnings reports on the amount you own from your company. That is, your capital is determined after the Income report, to show whether you gain from net income, or your capital decreased after net loss.
And finally the fourth financial report for a small entrepreneur is the Statement of Cash-flow. As the name itself implies this report includes those activities which require cash, like investment, operating, financing, and some other activities. It points out the sources and spending that cash went to during the accounting period. Sources can be incomes, sales of non-running assets, long-term financing, and indicators in current liability/asset accounts. Spending can be debt repayment, operating losses, apparatus purchases and rises in asset accounts.
If you want to be a success in preparing accounting financial statements, you should definitely consider each of these types.
Photo: © youlisten_2000
Photo: © FRANCESCO CARTA
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