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When You Learn Quickbooks, Know These 3 Vital Reports
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Accountants are generally responsible for preparing three primary types of financial statements for a business. But when you learn Quickbooks, you can easily pull up these 3 vital reports yourself through the "Reports Center."

The first of these reports is the income statement. The income statement reports the income and expenses of the business and the bottom-line profit or loss for a specified period.

The next report, the balance sheet, reports the financial position (assets, liabilities, and equity) of the business at a specific point in time, often the last day of the period.

The final vital report for a business, and often one that is overlooked, is the statement of cash flows. This report shows how much cash was generated from profit and what the business did with the money.

Everyone knows profit is a good thing. It's what our economy is founded on. It doesn't sound like such a big deal. Make more money than you spend to sell or manufacture products. But if you have ever owned a business, you know it's not always that simple, is it?

Well, some good Quickbooks tutorials - ones focused on showing you how to correctly enter your data - will give you a good foundation to get the correct reports and make vital business decisions.

Now, let's take a look at each of these reports in more detail:

The Profit & Loss Statement

A profit & loss statement, or net income statement, first identifies the business and the time period that is being summarized in the report.

You read an income statement from the top line to the bottom line. At the top of the statement is all of the revenue or sales made for a particular time period. Below the revenue is a line by line listing of all of the business expenses. The "bottom line" is the net profit or loss of the business, or, revenues minus expenses.

The Balance Sheet

The balance sheet reports the assets, liabilities and equity of the business. I like to tell people that you can think of the balance sheet like a house. For example, let's say your house is worth $100,000 (this is your asset) and has a mortgage of $76,000 (this is your liability). The difference is your equity, or $24,000. So, as you can see from this example, assets = liabilities + equity. A business is no different than this house, except it has a lot more moving parts.

The Cash Flow Statement

Because of some crazy accounting rules, you may spend money in your business, but it is not considered an expense. For example, if you buy inventory to resell, that purchase of inventory is not an expense until you actually sell it.

Because of these rules, the profit & loss statement can sometimes be misleading. As an example, have you ever looked at your profit & loss statement and it showed a profit, but you had no money?

This is because of these rules, and the cash flow statement resolves this. The cash flow statement shows you where all of you cash comes from and goes to during a certain time period. It sometimes is more instructive to look at a cash flow statement as opposed to a profit & loss statement.

Now, it can't be emphasized enough that you do not need an accountant to generate these reports for you. Quickbooks can easily generate these reports for you, but they will mean nothing until you learn Quickbooks through some fantastic Quickbooks tutorials.

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