Understanding financial statements: a beginners guide for entrepreneurs

The financial statements

Financial statements are formal written records that illustrate the financial activities and performance of a business. The financial statements can cover any period of time but are most commonly prepared for month, quarter and year ends.

The purpose of financial statements is to provide useful information for key stakeholders (eg. lenders and investors) so that they can make informed decisions based on a business’ financial health.

This blog is going to focus on the three main financial statements an accountant will provide.

Balance sheet

This is a snapshot of a business’ financial position at a singular point in time and includes 3 sections; assets (what you own), liabilities (what you owe) and equity (the net of assets and liabilities).

Profit & loss 

The profit & loss statement shows a business’s revenue and expenditure for a given period. Expenditure is net off against the revenue to illustrate the profitability of the business.

Statement of cashflows

The statement of cashflows looks at the movement of cash and the cash position of a company over a given period. This statement only includes cash movements, including cash received for revenue and cash received from investors and lenders.

This allows a business to determine their ability to cover short term expenses and forecast for future spending.

The next step

For any further information, please contact Sophie Bondzinskas on, or your usual UHY adviser.

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