Financial Reports are the documents and records you put together to track and review how much money your business is making. Among other things, it will tell interested parties how profitable your business is, where your business is getting its capital from, and how it is using it. This is important to keep track of for internal reasons, but it is especially important to have for any potential lenders or stakeholders to look at. When you are getting started there are three reports that are especially important.
In basic terms, a balance sheet is a snapshot of a company’s financial situation. This is one of the only financial reports that only applies to a single point in the calendar year. Many businesses use this at year-end to look at: assets, liabilities, and the net worth of the company. This is important to have because it gives an overview of the company’s financial health.
Profit and Loss Statement
This report summarizes the revenues, costs, and expenses that are incurred during a specific period of time. Typically these will be done either quarterly or annually. This report shows the ability of a company to generate a profit. It shows how revenue would have to increase, and costs would have to decrease this to meet the profit goal.
This report lists all the General Ledger Accounts. This is needed as a first step towards preparing Financial Statements. It is typically prepared at the end of each accounting period. This report serves as a checkpoint to make sure that for every debit, there is a corresponding credit. Doing this allows any errors to be found and rectified before the financial statements are created.
How Do I Set these up?
Setting these reports up is a breeze in programs where the logic for the reports are already set up. Any Accounting program that you are looking for should come with the capabilities for these reports embedded into the program. In Accounting Seed, these reports are directly accessible from Accounting Periods.