As a business owner, you’ll want to know where the money goes and comes from whether it is from tcs on sale of goods or the basic GST that you have to pay. Business accounting can be daunting and stressful, but it doesn’t need to be so. As an entrepreneur and small business owner, you are likely powering your company with both sweat and tears, but that does not mean you need spotty records or even worse — no financial documents at all! We will show you how important these key financial documents are for your small business and how you can start collecting them today.
- Profit and loss (P&L) statement
The profit and loss statement (also known as a P&L) is a snapshot of your business’s financial performance over a period of time. This report often includes the bottom line, which is the net income or loss after all expenses have been deducted. Hence A P&L statement will show you the sales figures for the month, any gains or losses from operations and any extraordinary items. It can also include cash flows — how much cash came in and how much it left the company during that time period. You may also have to include in your balance sheet items such as loans and accounts receivable if these cannot be directly linked to your sales.
- Balance sheet
The balance sheet is another important financial document that you need to prepare so that you can see how much money you have in the bank at any point in time, how much debt you owe and what your net worth is – this helps you determine whether or not your business will be able to survive even if there are unexpected expenses such as bad debts or a drop in sales due to poor weather conditions or competition from other businesses. Therefore, a balance sheet is a snapshot of your assets and liabilities at any point in time. It shows how much money you have on hand, what you owe to others, and what assets you hold that could be liquidated for cash or sold for other purposes.
- Cash memo
A cash memo is a summary of all your cash receipts and payments, highlighting any deposits or withdrawals that were made during the quarter. It also includes any interest income and expenses related to debt financing.
This document is vital to keeping track of all of your business’s financial data and can be used to prepare your monthly bank statements as well as tax filings, hence it is very important that you follow the right cash memo format.
- Cash flow statement
The cash flow statement is a financial statement that shows how much cash was generated by your business over a specific period of time (usually one year). The statement is broken down into three sections: operating activities, investing activities and financing activities. These three sections are then separated into two lines: the top line for current assets and liabilities and the bottom line for long-term assets and liabilities. You can use this report to analyze your company’s liquidity position.
