Income statement (Profit and Loss)
This is the most important report as tells you whether you are making money or not.
A well-run bookkeeping system will tell you where you are making money (sales) and
where you are spending it. This report should be reviewed monthly for corrective action.
Balance Sheet
In short, this report tells you what the business has (assets) and what it owes(liabilities).
Assets of a business are bank accounts (cash), accounts receivable (debtors). Other assets are
Property, fixed assets – plant and equipment and computers. Liabilities are normally monies
Owed to suppliers for purchases and anything else the business owes.
The accounting equation is based on the balance sheet Assets – Liabilities = Owners Equity and ideally
the difference in what you have and what you owe should be a positive number and simply means
the business is profitable
Accounts receivable (Debtors)
This report tells you who owes the company money and for how long has the money been outstanding
Accounts payable (Creditors)
This report details what the company owes and for how long it has been outstanding.
The golden rule is pay on time.to avoid penalties and interest being charged.