When it comes to owning and running a business, it is vital that owners have a clear understanding of certain financial documents. Financial documents work together to provide you with a clear picture of where your business stands financially. Whether you are getting ready to make some large decisions to grow your business or are getting ready for tax season, there are some financial documents that you need to understand well. Mark Dicus & Company is here to talk about balance sheets and profit and loss statements and explain why it is so essential for businesses to understand these important documents.
The Difference Between a Balance Sheet and a Profit & Loss Statement
There are two financial statements that you should be going over and reviewing on a regular basis, balance sheets and profit and loss statements. Both of them contain vital information for business. Here is the difference between the two of them.
– Balance Sheet: This will clearly show all the assets of your business as well as the liabilities that you have. It should show these two things since the business started and give you an idea of how much your business is worth.
– Profit & Loss Statement: This is a sales and expense record that shows the dealings in your financial year as a business. It will change back to zero as soon as the calendar year rolls over.
Understanding a Balance Sheet
The information that you will glean from a balance sheet is how financially viable your business is when you can see if your assets outweigh your liabilities.
– Assets: All of the assets that are long term or fixed will include property, equipment, and more. Intangible assets would include things like intellectual property rights. And finally, current assets include stocks, debtors and cash.
– Liabilities: Current liabilities are going to be payments that are due within a year. This could include bills owed to supplies and similar bills. Long term liabilities would be bank loans and leases.
Understanding Profit & Loss Statements
This is an important document because it will show you exactly how much money you are making as well as how much you owe in taxes for the year. Broken down, you can see how well your company performed during a certain period of time including a quarter, a year, etc. This statement can help you forecast for your company and make timely changes that can impact your business in a big way.
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If you are unable to make heads or tails of your financial documents and data, you aren’t alone. You can turn to Mark Dicus & Company to help you work it all out to help your business reach success. We will handle all of your bookkeeping and accounting needs so you can focus on growing your business. We want to help you succeed. Call us today!