While business vary greatly in terms of what they need to spend money on and how they make it, there are certain accounting reports every company should employ. This article gives a rundown of those reports.
The Income Statement
The most critical accounting report is the income statement, which is also called the profit and loss statement. Investopedia describes this as a summary of “revenues, costs, and expenses incurred during a specified period,” with typical periods being a fiscal year or quarter. Comparing different income statements is a way to see how the amounts of money flowing into and out of the company have changed over time.
The Balance Sheet
A balance sheet outlines a company’s assets versus its liabilities. Assets are elements like accounts receivables and bank accounts. Assets may also take the form of property, equipment, and other items. Liabilities are essentially debts—sums that your business owes. Examples of liabilities include mortgages and business loans. Companies generally want to increase their assets at a faster rate than their liabilities increase.
The Revenue by Customer Report
Another helpful accounting tool is the revenue by customer report, which reveals how much each of your customers paid your company during a certain window of time. Businesses can use this report to decide which customers to follow up with and prioritize to generate the most revenue. It is especially valuable for businesses that rely on repeat clients.
The Accounts Payable Aging Report
The accounts payable aging report is an accounting document that shows the amounts your business owes and to whom. Looking at this report is can help your business make its payments on time, which is quite important: Late payments can lead to frayed business relationships and extra fees, among other problems.
The Accounts Receivable Aging Report
The accounts receivable aging report shows which customers owe your business money and how much they owe. Among other uses, it can help you identify perpetually late-paying customers who may not be worth the trouble.
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