The Information You Should See In A Financial Statement

Although bookkeepers are the ones responsible for preparing a financial statement, it does not necessarily mean that business owners no longer have the right to know the information that must be included in it. There are instances when bookkeepers fail to provide the information that the business owner needs in order to determine if it is time to grow or expand your business. There are essential details that must be found in the financial statement for you to make sure that you are well aware of the financial standing of your business.

Income Statement

The Income Statement Report provides you an overview of the overall performance of your business. It provides you the details of profit and loss in a particular period. The income statement also provides you the profit/loss before tax, profit/loss after tax, income tax, expenses and revenue.

The Profit Before Tax is the amount of sales higher than the amount of cost that has been produced. Loss Before Tax is the amount of sales, which is lower than the cost to produce. When the report shows loss, it only means that the operation of your business is not doing well.

The Profit After Tax is obtained when you identify the income tax you are going to pay. The actual amount of profit or loss is computed if the applicable amount of tax is deducted.

The Income Tax refers to the amount of obligation that your business needs to pay to the government. This is determined by checking the country where your business is currently in operation. The Income Tax is determined from the tax rate obtained from a particular country multiplied against the Profit Before Tax.

The Expenses are the amount of cost to produce an item that will be sold. This can be referred to as the material used, bad debts expenses, depreciation, interest expense etc. The Expenses also help you determine if your business is spending on product improvement or investment. This is also the section that will tell you if you have given high salary or benefits to your employees.

The Revenue gives you the details of the amount of sales in a given period. There sales may come from the service fees or the sales price of goods. It will also depend on the kind of business an owner runs.

Balance Sheet

The Balance Sheet is where you can find the asset, liability and equity. The asset adds business worth and it provides significant information on the fixed assets, receivables, short-term and long-term investments and more. The assets are important because they tell you whether it is high time for your business to grow. It is also a reliable section that will tell you the business operation’s sustainability.  The liability is your business’ outstanding loan obligations.  The liability will show you the balances for bills payables, accounts payables and notes payables. The equity tells you if your business is ready for expansion. If you have high equity balance, it is a good indicator that you have kept your business on its feet.

Tamara Deterding

Written by : Tamara Deterding