How do your financial statements tie in with one another?
At a minimum, every business should have a Balance Sheet, an Income Statement and a Statement of Cash Flows. These three reports create the full picture of your business, and it is important to review all three of these reports at least once a month.
-The Balance Sheet lists your assets (what you own), your liabilities (what you owe) and what’s left over (equity).
-The Income Statement lists your income, expenses, and the net result, which is commonly known as your profit or loss.
-The Statement of Cash Flows allows you to see where your cash came in from, and where you paid it out to.
When compiling these three reports over the same time period, the numbers should all report within one another. For example, the net income amount will show the same number on the Balance Sheet, the Income Statement, and the Statement of Cash Flows. Another example is your Balance Sheet vs your Statement of Cash Flows. When looking at your cash amount, your Balance Sheet should show the same amount as your Statement of Cash Flows.
Each report has a different financial reporting purpose, and is therefore important to review each report, and see how they tie into one another. By having the full picture OF your business, you will be able to make the best decisions FOR your business.
Do you have access to these reports for your business? Do you review these three reports monthly? Do you need help understanding your reports? I can help, ask me how!