Making a Profit

 Making a Profit

An income statement shows the company's profitable activities and the profit or loss for a particular period. A balance sheet shows a company's financial position at a particular point in time. A cash flow statement shows how much money has been generated from profits and what the company has done with it.

An accountant is responsible for preparing her three main types of financial statements for a company. An income statement shows the company's profitable activities and the profit or loss for a particular period of time. A balance sheet shows a company's financial position at a particular point in time, often at the end of a period. A cash flow statement shows how much money has been generated from profits and what the company has done with that money.

Everyone knows that winning is good. Our economy is based on it. It doesn't sound like a big deal. Earn more money than you spend selling and manufacturing your products. Of course, nothing is really that easy, right? An income statement or income statement first identifies the business and period summarized in the report. You read the income statement from the top line to the bottom line. Each step in the income statement shows a deduction for expenses. 

An income statement also shows changes in assets and liabilities, so an increase in sales is either due to an increase in a company's assets or a decrease in its liabilities. If the expense line increases, it is because the asset has decreased or the liability has increased.

Net worth is also known as the company's equity. They are not exactly interchangeable. Net worth represents total assets minus liabilities. Equity refers to who owns the assets after the debt is paid.

These changes in assets and liabilities are important to company owners and management. Because you are responsible for managing and controlling such changes. Achieving profit in a business requires several variables, including not only increasing the amount of money flowing through the business, but also managing other assets.