Every business needs accurate financial statements that reflect their financial health and areas of growth. These statements are the balance sheet, income, and the cash flow statements. Each of these carries a specific purpose and represent different areas of business operations. Furthermore, they are generated on a specific cycle to allow accurate tracking such as a monthly, bi-annual, or even a weekly configuration.
The Balance Sheet
This is a statement that summarizes the liabilities, assets, and the owner’s or shareholder’s equity at a given point in time during a fiscal period. The liabilities are the debt’s, expenses, (accounts payable), that the company has to financially cover. The asset are the cash, property, and inventory. Basically, this report represents what is owned by the company and is generated for the shareholders, investors, in addition to the board of directors and owners of the company. The equity is the dollar amount that shareholder’s or the owner’s have invested into the company. The following formula represents the balance sheet:
Assets= Liabilities + Equitiy, (Owner’s or Shareholder’s investments).
The Income Statement
This report depicts the profit and loss, (sometimes referred to as the ‘revenue and expense report’ or the ‘profit and loss statement’). Understandably, this represents the financial performance of a business for a given period of operation. Normally, this report is generated on a quarterly basis for a fiscal year and summarizes both the non-operational and operational activities and the associated costs. In addition, this report shows the gross profit along with variable and fixed expenses. It also itemizes which revenue streams are profitable.
The Statement of Cash flow
The name says it all, meaning that this report represents the where, how, and why revenue enters and exits the financial landscape of a business. The cash that enters a business can originate from many resources as shareholder investments, owner investment, loans, and sales,(accounts receivable). The outflow of cash follows the avenues of operating costs, overhead, manufacturing costs, inventory costs, and external investments. Similar to the other reports the cash flow statement represents a specific period of time during a fiscal year.
Generating these reports is necessary for the analysis of how well a business is operating and help determine the profitability of the business management philosophies. In an effort to make this process easier for the local businesses in Brampton Envolta offers their expertise in generating these statements in addition to aiding in the analysis to help businesses understand how their business is doing.