Business Accounting Relies on Financial Reporting
There are three main types of financial statements: the income statement, balance sheet and cash flow statement which comprises an essential part of small business accounting. Income Statement is a report that shows the profit or loss for a specified period, usually one month, quarter, or year.
Most small businesses use cash basis accounting, which means that we report the sale when we receive it costs money and report when we paid. This statement will buy what you bring and what a month's worth of fees looks like. If you are searching for more information about small business accounting then you can explore www.mmtaxaccounting.com.au/.
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A Balance Sheet is a report prepared on time, not for a period of time, and it shows your company's assets, liabilities, and equity. It will show you what "value" of the business in terms of 'we can sell assets to pay our obligations and this is what we are going to leave.'
A Statement of Cash Flows is a report that shows your cash activity for a specified period, usually one year. It will show how much money you earned and used the business of strictly business operations and from investment and financing.
If your business is ever in a position where they need financial assistance, it is necessary to apply for a loan or line of credit, your lender has the hope to see your financial statements. This applies equally if you are looking for a partner or investor.