The primary purpose of any accounting system is to gauge the financial health of your business. Putting data in appropriately is important, but the way you make that data useful is to pull together information using a series of financial reports. These reports serve as a communication tool for you and your managers to use to make key decisions. They are also needed to report your financial condition to banks (so you can get loans), to shareholders, to vendors, and to the federal government in the form of tax reports.
The two most important reports are the balance sheet and the profit and loss (P&L) statement. The balance sheet is made up of assets, liabilities, and equity. The P&L statement includes income, cost of sales,