First you need to know which financial statements are important. They are:
- Balance Sheet—shows the financial conditions of your business at a point in time
- Statement of Operations (Profit and Loss Statement)—shows whether you made a profit during a specific period of time
- Cash Flow Statement—shows what happened to your cash position during a specific period of time
You should have a basic understanding of each of these statements. When compared with statements from prior periods, you can determine whether something is happening in your business that needs your special attention.
Your accountant can prepare these statements for you from the business data that you supply. There are also a number of computer software programs that will help you generate these statements from your input of regular transactions such as sales, collections, purchases, payments and payroll.