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Accounting Basics
Balance Sheet = snapshot of your business's financial state as of a specific date. Consists of Assets (your cash, equipment, and what is owed to you), Liabilities (what you owe - your outstanding loans/debts), Owner's Equity (the difference between your assets and liabilities - what you have left after paying what you owe). Assets = Liabilities + Owner's Equity
Profit & Loss = Income and expenses for a specified time period. Consists of Income (money you have received), Expenses (money you have spent), Profit (more income than expenses), or Loss (more expenses than income). Profit & Loss Statements can compare different time periods such as 1st quarter compared to 2nd quarter, or last year compared to this year.
Cash Flow = changes in your cash during a period of time and the ending cash status at a given time (like your checkbook register). There should never be a negative cash balance! Beginning Cash Balance + Incoming Cash - Outgoing Cash = Ending Cash Balance.
Are you a Cash Basis or Accrual Basis business?
