In order for an entrepreneur to make financial decisions, it’s important that they understand the business financial statements. Likewise, a manager that makes decisions related to the income, assets, liabilities and cash flow needs to know how to read business reports. It doesn’t take an accountant to understand financial statements. In fact, a person doesn’t even need to understand the minutia of debits and credits.
Small Business Financial Statements
Financial statements allow the business to stop in time and take a snap shot of how the business is doing. The reporting is usually done at the end of an accounting cycle like fiscal year, calendar year and/or at months end. There are generally three main financial statements, including:
- Income Statement
- Balance Sheet
- Statement of Cash Flows
At the end of an accounting cycle, certain general ledger (GL) account totals are transferred to the income statement and balance sheet.
