When you keep your company’s books day after day, all those invoices, checks, and other transactions blur together. But hidden within that maelstrom of figures is important information for you, your accountant, your investors, and the IRS. When consolidated and presented the right way, your books can tell you a lot about what your company does right, does wrong, could do better, and has to pay in taxes.
Over the years, the Financial Accounting Standards Board (FASB) has nurtured a standard of accounting known as GAAP (generally accepted accounting principles). GAAP includes a trio of financial statements that together paint a portrait of company performance: the income statement (also known as the Profit & Loss report), the balance sheet, and the statement of cash flows.
Generating financial statements in QuickBooks is easy. But unless you understand what these statements tell you and you can spot suspect numbers, you may simply end up generating fodder for your paper shredder. If you’re new to business, get started by reading the first part of this chapter, which is about what the income statement, balance sheet, and statement of cash flows show. If you’re already an expert in all that, jump to the section on generating these reports in QuickBooks (Generating a Profit & Loss Report).
When you close out a year on your company’s books, these three special financial reports are a must. You’ll learn how financial statements fit into your ...