Types of Financial Statements
In most business, especially those that use some sort of financial accounting software, financial statements include:
Balance Sheet – This is really a snapshot of your business status at any time and shows assets, liabilities, capital and owner’s equity.
Income Statement or Profit & Loss – The income statement can be complex based on the size of the business or very small if there is only one department. It breaks downs total revenues, less fixed and variable expenses to show a final profit (or loss).
Trial Balance – The trial balance is created through journal entries made to various journals and schedules and an accurate trial balance must balance or adjustments may be needed.
Journals & Schedules – These show more detailed postings based on type, date, and amount and offer up running totals for the accounting period.
Detail General Ledger – The detail general ledger offers up every journal entry (debits and credits) along with all account activity for the accounting period posted into your chart of accounts.
Cash Flow Analysis – These can be forecasted or actual and are a great comparison tool. They show revenues and all expenses in an easy-to-view format that shows a profit (or loss) at the end of each accounting period.
EBTIDA - Also known as earnings before taxes, interest, depreciation, and amortization, an EBTIDA report is often favored by investors.
So with these types of reports, why are financial statements and the decision making process important when it comes to analyzing your business?
In the following sections, we’ll look at each one to see its importance level when it comes to the business owner, lender or investor.