In running a business or business on a small or large scale, financial statements are important things that should not be missed. The financial data contained therein makes it easy for you to find out the financial condition of the business you are running in detail. With this report, of course you can also strategize or make decisions.
A successful business certainly has a clear and healthy financial condition, but a number of business owners are still unable to implement a management system properly. Financial statements do tend to be complex and need to be done by people who are experts in their fields. This report certainly has an important role for the progress of the business. To find out more, see the review below.
Money that goes out in a business is often not recorded because it’s in the form of receipts and receipts that make most business owners frantically with the amount of costs already incurred. The existence of financial statements is certainly very helpful to anticipate this. However, there are actually several types of financial statements that are needed in running a business. What are there?
Financial Statements: Profit and Loss
An income statement is a type of report that must exist in a company. The existence of this report will help you know the performance of the business in a certain period. Generally, this report contains aspects of income, minority rights, tax burden, and others. This report can be used as a reference for capital that will be used in the future because the purpose of this report is made to explain the amount of loss that you have. In addition, you can also make comparisons of expenses made from before so that helps in the effectiveness of budgeting.
There are two types of income statements, viz.
1. Single Step
This type is most commonly used in basic reports or business scales that are not too large. This type of work is to record all income and profits placed at the beginning of the report. then followed by all expenses and costs that must be incurred. This difference between total income and expenses is used to analyze profit and loss.
2. Multiple Step
This type is done by classifying operational and non-operational transactions and comparing income-expenses to each transaction. In this type of report also shows the difference between ordinary and incidental activities.
Financial statements: Cash Flow
In addition to profit and loss, reports that are needed in a business are cash flow . Generally, this report contains transactions or costs that go in or out. With this report, you will also know the cash flow that occurred in the previous period. Not only that, cash flow statement can also be a determinant for financial planning in the future.
Balance
A balance sheet is the most important report that a company must have. The contents of this report are liabilities, assets, and equity. Assets are usually the sum of liabilities and equity. Here, you can also see cash balances, property investment amounts, customer deposits, and debt amounts. Thus, you will get detailed details about the good or bad status of your business compared to the previous condition.
Also read: What is a Balance Sheet, and How to Example
Statement of changes in capital
Every business actor wants to spend less capital than the previous period, but of course in a business that may not happen. Making reports of changes in capital is very important to be made. However, before preparing the report, you need to complete the income statement in advance to find out whether your business is making a profit or even losing.
After that, then you can make a report on changes in capital, where you can analyze what causes more capital spent. If there is a depreciation of capital, you should immediately find the cause to avoid this so that the capital spent in the next period decreases.
Things that need to be considered in preparing the capital change report are the model at the beginning of the period, personal retrieval, tax expense and income statement.
Debt Accounting
The next financial statement that is no less important is debt accounting to provide information about borrowed funds for business purposes. When compiling, you also need to write down the age of debt so that it is easy to make decisions based on cash flow for the business being run.
Notes to the Financial Statements
Although agencies generally focus on 5 financial statements, there is one type of report that is no less important. namely the notes to the financial statements. This note serves to review other reports. Notes to the financial statements contain data analysis or a more detailed list related to the balance sheet, income statement, and also the statement of cash flows as material for review and verification.
