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15760 Ventura Blvd, Suite 610 Encino, CA 91436
FREE CONSULTATION818-436-2775
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Financial Reporting Fundamentals Every Business Should Know

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Many different types of businesses exist, and an array of managers perform the intrinsic operations of each business, which includes financial work. Even managers who do not actively participate in their companies’ financial work will likely become involved in financial reports via spreadsheets, reports, or other statements. According to Kwelanga Training, non-finance managers, who may or may not use a Los Angeles accounting firm, need to know a few things about basic accounting topics, including how to prepare financial statements.

 

Basic Financial Statements

All managers need to understand the three basic, financial statements, as explained by MindTools, which include the following:

  • Balance Statement – The balance statement shows what a business owns and owes on a daily basis and contains a breakdown of the company’s assets (cash, inventory, accounts receivable, and equipment), liabilities (bank loans and accounts payable), and equity (paid in capital and retained earnings). Companies prepare the balance statement upon reaching the completion of an accounting period, such as a month or quarter.
  • Income Statement – This statement compares inflow via incoming cash or accounts receivable to expenses, such as cash expenditures, inventory, and supplies.) This comparison shows the difference between income and expenses, the net income. This also indicates the operating profit or loss of a business.
  • Cash Flow Statement – This statement is similar to an income statement. However, it requires the manager to convert all non-cash accounts into actual cash value. For example, how much would all of the business’s assets be worth if liquidated today? Managers must add and subtract the changes in non-cash accounts to determine the cash flow. Additionally, managers need to include the cost of depreciation, such as aging computers or software suites, in this statement. Due to this statement’s complexity, companies routinely outsource the creation of this report to a local, Los Angeles accounting firm.

 

Insights From Financial Statements

The income statements indicate how a business obtains money and its core of operations. By preparing all of these statements accurately, businesses can ensure the actual value and current financial state of the business is stated accurately with verifiable proof. Businesses must also file these reports when reporting earnings or losses to the Internal Revenue Service (IRS).

For non-finance managers, generating financial reports and statements can be a burden, and failure to create the reports accurately could lead to tax penalties. To learn more about the important role of accounting in your business, contact Accounting Taxes Payroll Solutions, a Los Angeles accounting firm, at (818) 436, 2775, or request an online quote for your business today.