Creating Financial Statements
What are financial statements?
Financial statements are reports that summarize important financial accounting information about your business. There are three main types of financial statements: the balance sheet, income statement, and cash flow statement.
Together, these statements provide you—and outside people like investors—a clear picture of your company’s financial position.
Common Types of Financial Statements
1. Balance Sheets
A balance sheet is a snapshot of your business finances as it currently stands. It tells you about the assets you own, and liabilities (i.e., debts) you owe, at a particular point in time.
How often your bookkeeper prepares a balance sheet for you will depend on your business. Some businesses get daily or monthly financial statements, some prepare financial statements quarterly, and some only get a balance sheet once a year.
For example, banks move a lot of money, so they prepare a balance sheet every day. On the other hand, a small Etsy shop might prepare a balance sheet every three months.
This sheet contains information about the company's liabilities, assets, and shareholders' equity, and is based on this accounting equation: