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Woman confused about her accounting information
Accounting information is the collected and stored particulars of the financial and accounting data of a business. It is used and processed by the internal users. An accounting system is generally computer based data. Accounting data usually comprises of much more that the financial statements, balance sheets and cash flow charts. It contains data of revenue, expenses, bookkeeping, customer information, data related to tax paid and due, and employee information. It also includes sales orders, purchase receipts, requisitions, invoices, ledgers and such financial statements of this type. 

Inventory is up to date in an accounting information system. Check registers that were previously made on old fashioned registers of paper are now maintained in computerized systems by installing special accounting data using specific software. Using this software makes data interpretation much easier to access and report.

As this accounting data is for company use only and it consists of customer and employee information and other sensitive data, they are highly secured. Security checks are maintained in the accounting information system and hackers and other external sources are prevented from accessing the data.

The data that an accounting information comprises is very important and it must be interpreted correctly. In the case of wrong interpretation, the company can go into loss. Because of this, entrepreneurs must know the basics of accounting data and its elements. They must fully understand their financial statements. While, of course, they can segregate the job to accountants and other personnel, the entrepreneurs must still understand the accounting information on their own. They should be able to access, interpret, and account for the information in both internal meetings and with the outside sources.

Financial mistakes pose an adverse risk to the growth of business and it can damage the reputation with the customers and suppliers.

Common Mistakes made in Interpretation of Accounting Information and How to Avoid Them 

1.  Business owners often mix their personal finances with business expenses. Keeping these two finances separate is of utmost importance. If these two finances (personal and business) are not segregated, it is impossible to know what was intended for business and what was used personally. The amount of profit that was generated out of invested capital cannot be estimated correctly if the two are intertwined.

2.  Entries are not done in time. Getting behind in bookkeeping and the submission of entries of expenses or sales will not yield an up to date picture of the business and will not allow you to make timely decisions. It can lead to a negative balance if the expenses are entered but the income statement is not updated. Invoices to be paid by the company may go unnoticed and it can lead to a bad reputation of the company. It can even end terms with suppliers. Business growth is halted or significantly reduced when you do not enter data in a proper amount of time.

3.  Not setting up a proper software that is needed by the company leads to faulty decision making. Further more, installing the wrong (more complicated than required or lacking crucial functions) software can lead to inappropriate data entry. Sound decisions are hard to make when your company lacks the proper accounting software that it needs.

4.  Failure to double check the reports and statements and, instead, just relying on checking the amount of net profit may lead to many errors or malfunctions in business. Accounting information software is just a tool to use. Decisions must be made after completely checking the reports and interpreting the data. Data interpretation is made by comparing financial statements with the cash flow statements and the balance sheets.

5. Keeping all receipts until all taxes are paid and an audit is conducted is must. Even after that time period, receipts are very important for matching data entries in registers or in software.

6. After a long day of work, there is more of a chance of mathematical or data entry mistakes. Stay focused. One mistake can lead to big errors.

7. Entrepreneurs and business owners must focus on the long term consequences of the decisions they make after getting a full picture of their accounting information. Short term decisions after interpretation of accounts data do not set the business up for long term benefits.  Always focus on the future and the bigger picture.

Conclusion

Correct interpretation of accounting information is the backbone any business. Specifically, focus on accurate bookkeeping practices and be sure to pay attention to every little detail so that you can take that information and make wise decisions for your company.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Pen on earnings report with calculator on desk of financial adviser. Concept of invest planning, analyze return on investment.
An accounting statement is the written report of the financial condition of a company. It is the first step in formulating a financial management system. Accounting statements should be prepared on a monthly basis to have a proactive approach. Financial or accounting statements have the following elements.

Income Statement

An income statement measures the sources of revenue and expenses of businesses.

Cash Flow Statements

Cash Flow Statements are the combination of income statements and balance sheets.

Balance Sheet: Gives a snapshot of business assets, liabilities, and equity of owner for a specific period. It is one of the most helpful tools in the financial management system. It is used to measure financial activity for a specific period.

Key elements of the balance sheet are:

  • Current assets
  • Fixed asset
  • Other asset
  • Current liabilities
  • Long-term liabilities
  • Owner equity

A Cash flow statement has four-parts.

  • Net cash flow from operating costs
  • Net cash flow from investments activities
  • Net cash flow from financing activities
  • Net change in cash and marketable securities

The success of an entrepreneurs lies in financial statements because financial statements provide details for better decisions. The progress of businesses can be assessed and measured from these statements.

Following are the advantages of accounting statements driven by successful entrepreneurs.

Predict Future Progress

Entrepreneurs make future predictions which attract and motivate others to work on that great vision inspired by them. Their predictions are based on three projections i.e. assets, future revenue, and operating costs in future. Financial statements provide analysis of projections and allow the company to achieve goals.

In the initial stage of entrepreneurship, projections are used make a team, providing them a strong, practical and measurable vision.

In the middle of businesses, financial statements are used as a measuring tool for determining the accuracy of projections.  Sales and cost trends are assessed to make future predictions. Comparison of past sales and current sales is used to predict future revenue. Similarly, by understanding all steps of manufacturing, supply chain and delivery provide predictions of how the cost will affect the revenues of the future. Bookkeeping is specifically helpful at this stage to make future predictions.

In late periods of entrepreneurship, financial statements reduce complexity and make it simpler to achieve goals and to be more specific in the procedures and targets.

Future Commitment

To grow a business, entrepreneurs must make commitments. Commonly four types of commitments are made by entrepreneurs.

  • Make investments for a fixed asset or a long-lived item. For example: machinery or building
  • Promise for payment of a large amount for a specific period which may be rent of a fixed asset or salary of an expert.
  • Lending cash for expansion of the business.
  • Investments of working capital. For example: inventory management at specific level or clients credit.

These commitments are made to invest in such asset which will lead to the reduction of operating costs and for capacity building to serve future demands. Money, time and energy are utilized. Delivery procedures and sales funnels are designed for conversion of raw materials to a product required by clients. Measuring costs of all of these steps help in making a practical commitment. Predictions and analysis of cash flow help you to prioritize commitments.

Measurement of Progress

Accounting or financial statements are used to measure the progress and make critical adjustments in entrepreneurship. Bookkeeping also provides clarity in the scenario.

The first step is the comparison of actual progress and projected progress. This comparison provides you a report regarding achieving goals and targets set by entrepreneurs. Top performers can be rewarded if you measure progress accurately and determine individual contribution. Progress measurement helps you to recognize problematical areas and bottlenecks. It helps in preventing fraud and making a strong, trustworthy, and motivated team.  Progress analysis results in better decisions for the future.

It helps you to recognize cost trends so that you identify the problem early and make corrections necessary to keep the business safe and on the expansion and growth track.

Conclusion

Accounting statements are the lifeline of successful entrepreneurship. Quarterly reviews enable business owners to make better decisions for achieving goals. Bookkeeping is also used as a tool to control and analyze progress.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Audit text written paper on blue background

To understand how a company that is audit ready will capture more market share, we must first understand the basics.  What is market share?  What is an audit and who performs them?  And, how do I ensure that my company is audit ready?  Let’s take a look below.  

MARKET SHARE: Out of the total purchases made by customers for the same product or service in a market (in a country or in a global market internationally), the percentage of purchase that goes to a company is its ‘Market Share’.

AUDIT: An audit is the examination and inspection of bookkeeping and accounts by an auditor and compared with the physical verification of the stock/inventory.

Auditing is done by auditors. An audit can be done internally or by external auditors to inspect all of the accounting information and bookkeeping in a company.

Internal Audit is done by the employees of a company or by the head of a particular department in a company.

External Audit is done by an external auditing company or by a team of external auditors. All government and private registered firms are bound to get an external audit performed annually. An external audit is done by an independent company. An external audit is according to laws and rules, financial statements, balance sheets, and cash flow statements of a company. The external auditor prepares an audit report after the completion of the auditing process. Audit report information can be used by the investors, government agencies, and by the public. An external auditing company must be a registered and recognized qualified accountancy firm. The information provided by such an accountancy firm as an audit report gives a reliable and unbiased information to its users.

To keep an audit ready business, the business must use specific software for managing the accounting and other information of the company. There should be a system of well-established checks and balances in the accounting software used in the business bookkeeping and accounting.

The accounting software must be able to:

1. Adjust and automate day-to-day accounting jobs and financial endings 

2.  Eradicate the danger of manual worksheet mistakes 

3.  Reduce the time required for an auditor to recheck your calculations 

4.  Provide all required data to an auditor, but does not allow an editing or deleting option to any auditor.

 Benefits of Audit in a Business

  • It is better to keep a check and balance in business by carrying out a regular audit.  Especially when a company has employees, various offices, many technical works, and where a single person cannot run all the business operations.  These are all factors that provide chances of errors in business operations.
  • Weakness in the accounting and financial systems can be made clear after audits. Improvements can be suggested after an audit report.
  • By performing audits, business owners do not have to check or get involved in accounting functions daily. Audits provide a way for business owners to check that accounting functions are running properly per what they are being told. Frauds are minimized.
  • An audit report gives valuable information by which critical decisions can be made such as where internal controls need to be tightened, tax planning, or reducing the dangers of fraudulent practices.
  • An audit increases the trustworthiness and dependability of a business. Information is available to its users.
  • A company that is always audit ready attracts more investors and customers.
  • The overall rating of a business is increased after regular audits.
  • Banks, suppliers, and such users prefer companies in which audits are being performed on a regular basis.
  • If the company has insurance, the audited accounts are given more faith.
  • If there are shareholders in a company, audits give a guarantee to shareholders that the business is running a fair and true picture being drawn to them.
  • When purchasing from different companies, the companies with regular audits carry more weight. Bulk purchasers have a greater trust in audit ready companies.
  • An audit ready business provides a true financial status of a company that is very important for foreign entrepreneurs, banks, and investors.

Conclusion

Audit ready companies always have up to date accounting data. This account information is always available to its users and auditors. Regular audits ensure clear and transparent accounting information. Wise and confident future decisions can be made easier with regular audits. An audit ready business equates to a business ready to get its market share due to the trust of investors, customers, and legal authorities in that business.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Accounting Statements - Complete Controller

Understanding accounting, the language of finance and business, is crucial for all business owners and entrepreneurs. When starting a business, learning how to read financial statements is as important as managing any other task. It is of utmost importance to understand the statements, rather than continuing to invest money blindly.

With time, the business will hopefully expand, and bookkeeping with other companies, tax authorities, and customers will have to be made. The business bookkeeping must always be counted and rechecked. These transactions of business and records are maintained using various financial statements and accounting terms.

A successful entrepreneur has a strong understanding of the tools of accounting and finance. Grasping the knowledge of interpreting account statements allows an entrepreneur to be able to accomplish principal tasks. Check out America's Best Bookkeepers

  1. Entrepreneurs can evaluate and predict the future of business. They can work with other like-minded entrepreneurs to make business plans accordingly and work to achieve their goals.
  2. They can use their time, energy, and money more effectively by making important decisions to help the business grow.
  3. They can review business plans and respond tactically after interpreting accounting statements to prevent loss to the company.

The following are the three most important financial statements in business bookkeeping.

Income Statement

An income statement is divided into sales and expenses.

Sales include the selling of goods and services to customers and receiving monetary payments in return.

Expenses include:

  1. The purchases made on behalf of the company
  2. The employees that were hired for running the business and their salaries
  3. Bank loans that were received on behalf of business for investment or other purposes in the company
  4. Tax expenses that were paid as income taxes Check out America's Best Bookkeepers

Balance Sheet

A balance sheet is a collective form of statements that are made based on all transactions made in the past. It categorizes assets and liabilities.

Assets can be fixed assets as well as cash in the bank. It includes the raw materials, work in progress that will yield profit, finished goods, and the value-added tax. Value-added tax is a tax on the amount by which the value of an article has been increased at each stage of its production or distribution.

Liabilities comprise the payments that have to be paid by the company. It includes the gross amount of money that has to be paid to suppliers. Value-added tax liability is money paid to tax authorities for the sales that were done, and debt is the amount of money that has to be paid by the company to the lenders.

A balance sheet needs an end balance.

Cash Flow Statement

Cash flow statements show the money that flows in and the money that flows out.

A cash flow sheet includes the investing and financing cash flow. Investing cash flow is the invested cash in the fixed assets of the business. The financing cash flow describes the money in capital from what was either received from the investors or paid to the investors.

A third but essential form of cash flow is “operating cash flow.” It explains the money flowed-in and flowed-out to the running business.

These three cash flows are added and show the change in the overall amount of cash. Check out America's Best Bookkeepers

Conclusion

The above three financial statements are interrelated. As the income and expense statements increase, the assets and liabilities in the balance sheet will increase. The assets and liabilities will decrease per the cash flows from the cash flow statement.

Entrepreneurs need to know important information in credit analysis of their business. Understanding and correctly interpreting financial and accounting statements can work as a litmus test for entrepreneurs.

Accounting is the language of business. Interpreting this language will help entrepreneurs determine their value of assets. They will be able to calculate profitability and also estimate the risks in the assets of the company. They can understand the company’s financing sources. Entrepreneurs must realize investment, credit analysis, and profitability. The entrepreneur’s ability to identify debt and equity shows insight into the value of a company.

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
crystal ball business future - Complete Controller

A business owner uses accounting statements to converse about its financial statistics with interested parties, including investors and creditors. No matter how big or small your business is, whether you do your bookkeeping, or you have an entire accounting team, three financial statements must be arranged to deliver detailed information about a business’ financial condition. The following three financial statements cover subjects on everything from assets, liabilities, and equity to net income and cash flows.

Balance Sheet Check out America's Best Bookkeepers


A balance sheet is a financial report that lists the accounts and balances of a business entity’s assets, liabilities, and shareholders’ equity. A business entity reports such financial statistics in its balance sheet at the end of a bookkeeping period, providing a snapshot of its financial situation at that point in time.

Income Statement

An income statement, occasionally mentioned as the statement of profits and losses, reports a business entity’s various profit, costs, and expenses, as well as the net. Therefore, an income declaration is a summary of a business entity’s financial performance during a given bookkeeping period. An income statement typically is systematized to cover functional activities and non-operating events such as investments and any withdrawn processes. Check out America's Best Bookkeepers

Cash Flow Statement

The statement of cash flows displays the cash inflows and outflows between a business entity and the outside domain during a bookkeeping period. While incomes and expenditures reported in the income statement involve many cash transactions, they also include certain non-cash exchanges. In addition to operating activities, cash flows also come from financing actions and bankrolling activities.

Accounting Statements provide valuable information to a wide range of users:

  1. Managers require these statements to manage the dealings of the business by evaluating their financial performance and position and making important industry decisions.
  2. Stakeholders use these statements to weigh the risk and return of their investment in the enterprise and make investment verdicts based on their exploration.
  3. Prospective investors need these statements to measure the feasibility of investing in a business. Stockholders may foresee future dividends based on the profits disclosed in the reports. Moreover, risks related to the investment may be assessed from the statements. For example, inconsistent profits indicate higher risk. Consequently, financial statements provide a basis for the investment resolutions of potential investors.
  4. Financial institutions (e.g., banks) use these statements to select whether or not to grant a loan or credit to a business. Financial institutions gauge the financial health of a business to determine the probability of a bad loan. A sufficient asset base and liquidity must sustain any decision to lend.
  5. Suppliers need these statements to evaluate the creditworthiness of a business and determine whether to supply goods on credit. Dealers need to know if they will be repaid. Terms of credit are set according to the assessment of their customers’ financial health. Check out America's Best Bookkeepers
  6. Customers use these statements to measure whether a supplier has the means to ensure the steady supply of goods in the future. This is especially vital where a customer is reliant on a supplier for a specialized module.
  7. Employees use these statements for judging the company’s profitability and its significance to their future compensation and job security.
  8. Competitors compare their performance with opposing companies to learn and improve strategies to progress their competitiveness.
  9. The general public may be interested in the effects of business on the economy, environment, and the local community.
  10. Governments require these statements to decide the correctness of tax declared in the tax returns. The government also keeps a trail of economic development through analysis of financial statements of companies from different sectors of the economy.

Final Note:

Engaging yourself in your business’s bookkeeping can be eye-opening. It’s the best way to see how cash flows in and out of your trade and gain the framework you can use to ask yourself, your employees, and your stakeholders the right questions.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
statements with QuickBooks - Complete Controller

It’s good for business when employees work together towards a common mission of business success and profitability. Business owners also come to appreciate when marketable bookkeeping alliances foster transparency, compliance, and accountability in the financial statements of their company.

Accounting Statements Check out America's Best Bookkeepers

A company must print four financial data summaries at the end of a given period, such as a month, quarter, or economic year. These comprise a statement of finances, a declaration of profit and loss, a report of cash flows, and a statement of changes in equity. If you review a company’s financial statements year after year, you can see whether the business has compensated for its operating mistakes and moved forward from a profitability standpoint. A quick way to gauge that is going through its P&L and note profit trends over the years.

Consolidation

Consolidating accounting statements means adding up performance report data for two or more productions, depending on equity stakes and applicable guidelines. Think of it as totaling each financial item and ensuring the final bookkeeping result corresponds to the underlying percentage. When a company owns less than 20 percent of another entity’s equity, it uses the cost method under which the investment value doesn’t fluctuate, unless the affiliate files for bankruptcy or copes with insolvency. If the investment business has a stake ranging from 20 to 50 percent, it uses the equity method. Check out America's Best Bookkeepers

Consolidated Accounting Statements

These declarations are useful for appraising the financial position and results of an entire group of commonly owned businesses. Otherwise, reviewing the results of individual businesses in the group does not indicate the financial bookkeeping health of the group as a whole.

The key entities used in the construction of consolidated statements are:

  • A  parent entity and all of its divisions.
  • A subsidiary entity that is controlled by a parent company.

Therefore, consolidated financial statements are the collective financial for a parent company and its subsidiaries. It is also possible to have consolidated financial statements for a portion of a group of companies, such as for a subsidiary and those other entities owned by the subsidiary.

These statements require substantial effort to construct since they must exclude the impact of any transactions between the entities being reported on. So, if there is a sale of goods between the subsidiaries of a parent company, this inter-company sale must be eliminated from the consolidated financial statements. Another common inter-company elimination is when the parent company pays interest income to the subsidiaries whose cash it is using to make investments; this interest income must be eliminated from the consolidated financial statements. Check out America's Best Bookkeepers

Consolidated Accounting Statements with QuickBooks

If your business has numerous divisions or wholly-owned subsidiaries, consolidating accounting statements from all of them gives you a complete picture of the parent company’s financial health. You can use QuickBooks to merge statements, but it involves careful bookkeeping. Under some conditions, you’ll need the use of third-party software to import the financial data into QuickBooks.

QuickBooks lets you categorize transactions by class, giving the user great flexibility in how to define class. If your business has several divisions but is still a single legal entity, elect a class to report profit and loss by division. Be certain to identify each operation by its class, however, to keep the reports accurate. Beginning with QuickBooks, you can produce a new balance sheet report by class, displaying assets, equity and liability, and a consolidated balance sheet for the company.

Final Note

With QuickBooks, small businesses can reduce monthly costs while optimizing productivity. The key benefits are to eliminate many expenses and connect to financial institutions for free instead of paying a monthly fee. It can also provide access to more users, store data for free, and includes many more benefits.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
accounting statements - Complete Controller

Understanding accounting, the language of finance and business, is crucial for all business owners and entrepreneurs. When starting a business, learning how to read financial statements is as important as managing other tasks in the business. Understanding financial statements rather than continuing to invest money blindly is important.

 

Over time, the business will expand, and transactions with other businesses, tax authorities, and customers will occur. Business bookkeeping needs to be counted and rechecked. These transactions of business and records are maintained using financial statements and accounting terms. The following three are the most important financial statements in business bookkeeping. Check out America's Best Bookkeepers

  1. Income statement

The Income statement is divided into Sales and Expenses.

Sales include: The selling of goods and services to the customers and getting monetary payments in return.
Expense include: The purchases made on behalf of the business, employee salaries, bank loans that were received for investment or other purposes, and tax expenses that were paid as income taxes, etc.

  1. Balance sheet Check out America's Best Bookkeepers

The balance sheet is a collective form of the statement that is made based on all transactions made in the past. It categorizes the assets and liabilities. Assets can be fixed assets as well as cash in the bank. It also includes the raw materials, work in progress that will yield profit, finished goods, and even the value-added tax. Value-added tax is the amount of money that a tax authority owes you. Liabilities comprise the payments that have to be paid by the company/ business. It includes the gross amount of money that has to be paid to suppliers. Value-added tax liability is money paid to tax authorities for the sales that were done. Debt is the amount of money that has to be paid by the company to banks or other sources.

  1. Cash flow statement

A cash flow statement shows the cash (money) that flows in and the money that flows out. A cash flow sheet includes the investing and the financing cash flow. Investing cash flow is the invested cash in the fixed assets in the business. The financing cash flow describes the money in cash from that which was either received from the investors or paid to the investors. A third but important form of cash flow is “Operating cash flow.” It explains the money flowed-in and flowed-out to the running business.

These three cash flows are added, and it shows the change in the amount of cash.


Conclusion: Check out America's Best Bookkeepers

The above three financial statements are interrelated. As the incomes and expenses statement increases, the assets and liabilities on the balance sheet will increase. The assets and liabilities will decrease as per the cash flows from the cash flow statement.

 

Knowledge regarding financial statements interpretation is essential for entrepreneurs. Entrepreneurs need to know important information in the credit analysis of their business. Investors/entrepreneurs must understand fully how accounting is done in businesses. Accounting is the language of business. But, learning the meaning of a few terms used in accounting is not enough. Entrepreneurs must understand the parts of the above described financial statements. This will help the entrepreneurs determine the values of assets. They will be able to calculate profitability and also estimate the risks of the assets of the company. They can understand the company’s financing sources. Entrepreneurs must understand investment, credit analysis, and profitability.

 

Business owners/entrepreneurs can determine the debt and equity with accounting knowledge in business financing. The ability of entrepreneurs to identify debt and equity shows insight into the value of a company. Understanding the accounting statement is important for running a successful business.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers