Statement of Revenue and Expenses (Profit and Loss)
This statement allows you to add an itemized list of your revenues and subtracts an itemized list of your expenses to come up with a profit or loss for the period.
The Profit and Loss statement allows you to:
Track revenues and expenses so you can determine the operating performance of your business.
Determine what areas of your business are over-budget or under-budget.
Identify specific items that are causing unexpected expenditures. Examples are phone, fax, mail and supply expenses.
Track dramatic increases in product returns or cost of goods sold as a percentage of sales.
Determine your income tax liability.
Statement of Assets, Liabilities & Equity (Balance Sheet)
This statement gives you a snapshot of your business’ financial condition at a specific moment in time.
The Balance Sheet helps you:
Quickly get a handle on the financial strength and capabilities of your business.
Identify and analyze trends, particularly in the area of receivables and payables.
Determine if your business is in a position to expand.
Determine if your business can easily handle the normal financial ebbs and flows of revenues and expenses.
Determine if you need to take immediate steps to bolster cash reserves.
Determine if your business has been slowing down payables to forestall an inevitable cash shortage.
Maintaining a Clean General Ledger
The general ledger is the core of your company’s financial records. These records constitute the central ‘books’ of your system. Since every transaction flows through the general ledger, a problem with your general ledger throws off all of your books.
A monthly review of your general ledger will allow any discrepancies such as double billings or unrecorded payments to be corrected on your books.