Profit / Loss Statement
Also known as P/L, Income Statement or Statement of Income, etc.
A report that lists a business’s income at the top, Costs of Goods Sold and all other expense categories below. The final number is Net Income or (aka “Bottom Line”).
This report can summarize a range of dates – such as last week, month, quarter, etc.
A summary report that lists all of the business’ Assets, Liabilities and Owners Equity.
The Balance Sheet shows the owner what the business owns, (less) what the business owes, and what is left over.
Assets – Liabilities = Owner’s Equity
- Assets: Cash, Accounts Receivable, Equipment, etc.
- Liabilities: What the business owes, meaning Accounts Payable, Payroll Taxes Payable, etc.
- Owners Equity: Assets – Liabilities, the initial investment in the business – Owner’s Draws, + Net Income.
Statement of Cash Flows
Shows the flow of money coming in and going out of the business. It lists how much cash was used for operating, investment and financing activities, and how much credit was used to finance operations of the business for a specified period of time.
Accounts Payable / Accounts Receivable
A system that keeps tracks of Income not yet collected, and Bills not yet paid.
This is especially important to ensure that your business’ Income was recorded in the month service was delivered to your customers, and expenses recorded in the month vendors’ goods/ services were delivered to your business.
This system aligns inflows and outflows to their proper timeframe, giving a more accurate view of profitability for a given period of time.