What Important Financial Reports Do Accounting Services Prepare?

When it comes to small business accounting, there is a lot you need to know for making informed financial decisions. One of the best places for starting is by understanding the calculation of key financial ratios and the interpretation.

Before we get into this, let us see why accounting is so important for businesses and why you to hire small business accounting services.

Why Is Accounting So Important?

Accounting plays a crucial role in running a business since it helps you track incomes and expenditures, ensure statutory compliance and provide investors, management and government with quantitative financial information that you can use for making business decisions.

There are three main financial statement generated by your records.

The income statement provides you with information about the profit and loss. 

The balance sheet gives you a nice picture on the financial position of the business on a mentioned date.

The cash flow statement acts like a bridge between the income statement and balance sheet and reports cash generated and spend during a certain period of time.

It is crucial you keep the financial records clean and up to date if you want your business to function properly.

Here are things that small business accounting services do for your business, small or big.

Financial Statement Accountants Take Care Of

The Balance Sheet

The balance sheet provides a look at the company’s financial position at a particular point of time. This financial statement consists of three components- assets, liabilities and shareholder’s equity. The assets include anything the company owns such as equipment, inventory, cash and property.

Liabilities include accounts payable, or any type of payment made up of long-term loans. The owners’ or shareholder’s equity refers to what is left over after the amount of liabilities gets deducted from the amount of assets.

Assets are listed on the left side of a balance sheet. Liabilities and equity get listed on the right side.

The Income Statement

As the name denotes, the income statement outlines your profitability over some period of time such as a month, quarter or a year. It is also known as the profit and loss statement and contains the following components:

• Sales encompass total revenue generated and the cost of all goods sold.

• Operating expenses include items such as advertising and rent of office

• Non-operating expense includes one-time purchases and interests on debt taken on by the company

Statement Of Cash Flow

A cash flow statement provides a clear picture of where the company’s cash inflows and outflows. Analyzing the cash position and anticipating the cash flow needs are important small business accounting tasks that you must do regularly.

If you have any doubts, you can take assistance from your small business accounting services experts.  They can guide you as and when needed.

Always remember, cash is the king, your business must record a profit each quarter, but may experience a cash crisis because you are having a tough time converting assets.