Each business has a unique set of business details that may be different from another. These are the business details that you need to make sure. These are included in the financial statement as they pertain to your business. You can either invest your own time in researching them or you can hire the services of a reliable accountant.
There are two key aspects in these business details that you need to get in the financial statement. One is the income and the the other is the expenses. Let us look at them further.
Income that is earned by your business. This includes income like your sale of a cake. Income that you earn through the sale of goods and services are termed as gross profit. Gross profit is the net income after deductions of all other expenses. In the same manner, the expenses that are incurred by your business are termed as net expenses.
Expenses are charges that you incur to earn your business net profit. They include the costs that you incur for your business including the cost of materials that you need to buy to make your goods. In the same manner, you can also include the cost that you need to pay to your staff to run your business. Other expenses that you need to include in your financial statement are taxes that you need to pay also.
It is important to keep track of the turnover of your business. The turnover of your business can vary depending on what industry you are in. You can either keep a record of the number of units that you have sold or bought or whatever. But it is important to keep a record of your net profit and the number of employees as this is a basis to decide if the business is making money or not.
It is important to stay aware of the competition in the marketplace.
Head must be over Water:
It is important to keep your head above water when it comes to the business aspects of the business.
To keep the records, you will need to keep certain documents. You can keep these in whatever format you want. But these are the basic documents that you will need to keep for your financial statements.
* An ownership statement –
An ownership statement is a statement that shows the list of the individual owners of your business.
* A Profit and Loss Statement –
A profit and loss statement, also called a P&L, is a financial statement that indicates your business net profit. The P&L is also used as a statement to decide if your business is making profit. It is a statement that you can either get from the management or you can get from the owner of the business.
* Cash flow statement –
This is a statement that helps you decide if your business is making profit or not. It is prepared once a month and it shows how much cash your business has at the end of the month.
* A paid up capital statement –
The paid up capital statement is prepared when you have a credit note or a loan from a bank or a non-bank investor. It shows the amount that your business has that it can pay back in a month.
* A balance sheet –
A balance sheet is a statement that shows the total assets of your business and the amount that you have invested in it. It also shows the total liabilities of your business.
* Your personal income statement –
This is a personal income statement that you can get from the personal income tax return. It indicates the income that you and your family members has earned and received from your business activities.
* Your Family’s income statement –
This is also prepared from the personal income tax return but this time from the personal expenses. It will indicate the income that your family members has earned and the expenses they have incurred.
Business practice to pay your suppliers on time.