Financial statements

Income statements
Income statements Calculates profit of a business if it is gross or net profit so that the business can monitor there finance. The formula to work this out is Opening stock +purchases – closing stock. The gross profit is the profit made from your stock before your expenses are taken off and net profit is your overall profit after all your costs are taken off. Tax people will use these to see that a business is paying of the correct taxes and management of a business will use this to know how the business is running financially.
Balance sheet
A balance sheet is a snapshot and summary of all the business fixed assists that re fixed at a constant cost which are listed in order of liquidity and current assists which change over time, these include things such as land, vehicles and machinery a deter is someone who owe the business credit therefore making them a assets and liabilities which are things such as loans and hire purchases on assets and their equity at a certain time current liabilities have to be paid by 12 months and long term liabilities can be paid over a year. Creditors are people we owe credit as they gave us credit.. A balance sheet therefore states the value of a business. Net current assets are found by the current assets take away current liabilities. The second part to the balance sheet is the equity section to show the costs put into the business which should add up to the same as the total balance. Lenders will be interested as they want to know the assets you have and what liabilities your business may