As far as accounting or bookkeeping software is concerned, the two reports that are vital for financial purposes are the Balance Sheet and the Income Statement. I will explain what each one is and what purpose they serve. The Balance Sheet is simply a listing of balances of your assets and liabilities. Assets are anything major you purchase of value such as furniture, equipment, autos, computers, software etc. Assets are also any money you have in banks or other investments you such as CD’s. Liabilities are basically any debt obligations that you owe such as loans on the equipment or car you purchased for the business. It could also include things such as a line of credit at your bank or if you took out a home equity loan to use for business. The purpose of a balance sheet is to show what you are worth in terms of your business. Banks use this information to determine how you have been handling your business and may use this information to decide whether or not you are a good credit risk. Sometimes companies that you want to do business with will ask for the balance sheet.
Next, What is an Income Statement?
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