Bookkeeping in Six Steps Part 2

The fourth step is to prepare the financial statements.  There are 3 important reports that need to be completed.  

         1) Income statement or Profit and Loss ( monthly, semiannually, yearly)

         2) Balance Sheet (aka snapshot of business' net worth)

         3) Statement of Cash flow  (span of time)

The fifth step is to review the financial statements.

         1) Income Statement--Revenue, COGS, and Operating expenses

     *This is a great overview of the health of your business

         2) Balance Sheet--What business owns (assets), What business owes (liabilities), and equity (owners contribution or retained           earnings)

         3) Statement of Cash flow--it tracks the actual cash inflows and outflows of a business over a specific period of time.

The sixth step helps all your bookkeeping to make informed business decisions.

         *Key areas to analyze are the following

Revenue trends-compare periods to see growth or decline

Profitability-calculates margins (gross, operating cost, net)

Expenses-check for unusual or increasing costs

Assets/Liability-compare the difference

Cash flow-understand where cash is coming from or where it is going.

https://video.wixstatic.com/video/9120c0_7b570a0dc35a43e2b9d617081c91f1f4/1080p/mp4/file.mp4