It provides information about your cash payments and cash receipts, as well as the net change of cash after all financing and operating activities during a set period. Statement of cash flowsĬash flow is hugely important for any business. If you’re considering selling your business, a potential buyer will want to see what assets you have on the balance sheet. Investors care about your balance sheet because they can see whether there is enough cash for them to take a dividend. It’s a financial snapshot of how your business is doing. The focus of this report is on assets and liabilities. ![]() If you ever apply for a small business loan or line of credit, you may be asked to provide your income statement. This is the amount you have left after you’ve paid all debts. At the bottom, you’ll find your net income: revenues minus expenses. Below are all expenses or losses, including accounts payable accounts. This is a snapshot of the profitability of your business. Makes sense, right? Key Financial Statementsĭebits and credits come into play on several important financial statements that you need to be familiar with. In Latin, debere means to owe and credere means to entrust. The terms ‘debt’ and ‘credit’ actually can be attributed to him. This system of having a balance is called double-entry accounting and has been around since 1494 when Franciscan friar Luca Pacioli ( the Father of Accounting ) first published a book using this system. If, for example, you have a debit of $1,000 from the purchase of a new computer, you would then create an equal credit for the asset of the computer. These two entries must balance each other out. Liability, expense.Ĭredits: Money coming into your account. Going further, each of these types of accounts falls into two primary types of accounting entries:ĭebits: Money taken from your account to cover expenses.
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