FINANCIAL STATEMENTS

Understanding financial statements is essential to the success of any business.  GMG CPAs understand how financial statements can be used as a roadmap to steer you in the right direction and help you avoid costly breakdowns.  Financial statements have a value that goes far beyond preparing tax returns or applying for loans.  Financial Statements Include:

Balance Sheet (a picture of the net asset value of an entity at a single point in time)

ASSETS

Current Assets

  • Cash
  • Accounts Receivable (A/R)
  • Inventory
  • Notes Receivable (N/R)
  • Other current assets

Fixed Assets

Fixed assets represent the use of cash to purchase physical assets whose life exceeds one year, such as:

  • Land
  • Building
  • Machinery and equipment
  • Furniture and fixtures
  • Leasehold improvements

Intangible Assets

  • Research and development
  • Patents
  • Market research
  • Goodwill
  • Organizational expense

 

LIABILITIES AND EQUITY

Current Liabilities

  • Accounts Payable (A/P)
  • Accrued expenses
  • Notes Payable (N/P)
  • Current portion of Long-Term Debt (LTD)

Non-current Liabilities

  • Non-current portion of Long-Term Debt (LTD)
  • Notes Payable to Officers, Shareholders, or Owners
  • Contingent Liabilities

Equity

Equity is equal to total assets minus total liabilities.  Equity or Net Worth represents the owners' investment in the financing of the assets.

Income Statement

The Income Statement, also known as the Profit & Loss Statement, includes all income and expense accounts over a period of time. This financial statement shows how much money the business will make after all expenses are accounted for, in that period of time. An income statement does not reveal hidden problems, like insufficient cash flow.  


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