Financial Statements
Financial statements are key to understanding a company’s financial position.
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Financial Statements
Financial statements are key to understanding a company’s financial position. The three most important are the income statement, balance sheet, and cash flow statement. These three are prepared on a monthly and quarterly basis and can be prepared on an annual basis for many different purposes, including for audits. It seems hard and complex, but the financial statements of a company can be compiled using similar information as that of small business tax returns.
Our professionals here at Ottawa Bookkeeping will help you create your financial statements so that you can get a more accurate picture of your company’s overall financial health and so that you can make better financial decisions.
Income Statement
Also known as the “profit and loss statement” and the “statement of revenue and expense,” income statements measure a company’s financial performance over a specific accounting period. Typically prepared over a fiscal quarter or year, the income statement summarizes the company’s revenues and expenses from both operating and non-operating activities and provides a statement of net profit or loss. This statement also provides additional information (such as gross profit, fixed vs. variable expenses, and most profitable revenue streams). Together, all these components make the income statement an important part of a company’s financial health.
Cash Flow Statement
The cash flow statement provides aggregate data regarding all cash inflows from a company’s ongoing operations and external investment sources and all cash outflows that pay for business activities and investments during a given accounting period. A cash flow statement differs from an income statement in that it only tracks the company’s cash inflows and outflows whereas the income statement might track non-cash items like amortization and impairments which are important when evaluating a small business’s financial statements.
A business may earn cash in many different ways, and so it is important to look at the cash flow statement in comparison to the company’s income statement and balance sheet. Our professionals here at Ottawa Bookkeeping will work together with you to help you understand your cash flow better so that you can keep a close eye on the blood of your company’s operations.
Balance Sheet Statement
A financial statement summarizes a company’s assets, liabilities, and shareholder’s equity at a specific point in time. Assets include things such as cash, inventory, or property and tell investors and other stakeholders what the company owns whereas liabilities such as accounts payable or long-term debts tell the shareholders what the company owes. Lastly, the shareholder’s equity section shows how much money shareholders have invested into the company.
The balance sheet must follow and represent the following formula: Asset = Liabilities + Shareholder’s Equity.
Preparing these three financial statements can be daunting, but our accountants here at Ottawa Bookkeeping have the technical competency and expertise to easily put these statements together. Their experience in doing so will allow them to work faster and complete the documents in only a fraction of the time so that you can use your financial statements to attract new investors, obtain a loan, and find other innovative ways to grow your small business.