If you want your company to succeed, you must maintain detailed financial records related to the operating of your business. Gaining a grasp on the more complicated aspects of accounting can help you garner a better understanding of your company’s finances, though hiring a professional accountant may be the most practical approach. Whether you learn as you go or hire a pro, two of the fundamental elements of business bookkeeping are your income statements and balance sheets.

Income Statements

When you want to track and analyze revenues and expenses over a period of time, an income statement offers the best glimpse. Usually, these reports are made monthly or quarterly and then integrated for yearly reports. An income statement gives a good look at a company’s performance and if you are a publicly-traded company, it is directly reported to the Securities and Exchange Commission (SEC). Income statements cover the basics: revenues, expenses, gains, and losses. From this tracking, periodic reports will show both short and long term growth, health, and future predictors for success. This information helps mold financial decisions for the next fiscal season, quarter, or year.

Balance Sheets

As important as the income statement reports is your balance sheet. Balance sheets aim to track the three fundamental areas of your business financials: assets, liabilities, and shareholder equity. Balance sheets don’t cover a range of time but rather a specific moment, which offers insight into shareholder equity at the drop of a dime. Balance sheets offer a quick view of the company assets, what is owed to other parties, and how much your shareholders have invested in you.

A balance sheet works with a formula that is used to track what your company has at any given point in time. That formulaic equation used by a balance sheet is Assets = Liabilities + Shareholder/Owner Equity.

Merging the Two

The two together- income statements and balance sheets- provide the perfect tool for gaining a look at the financial health of your business. Don’t wait for tax time or quarterly reports to run some numbers; generate reports anytime to gain perspective and see where you are going. If your company is big enough to employ analysts, they would use both reports, the income statement and balance sheet, to give you an overview of your company’s finances and offer predictions based on these reports.

Maintaining the income statement balance sheet is integral to the smooth operation- and subsequent success- of your business. Don’t have time to track your assets and liabilities? Call the professionals at BMH Accounting; they can provide you with a snapshot of your company’s financials and help you analyze data to improve daily function and overall operation.

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