Six Steps To Small Business Success

Although the United States economy has picked up, including an increase in retail sales at Christmas, it could be many years before business rebounds to pre-recession times.

 The following is an additional concept discussed in the book “Six Steps to Small Business Success” by David J. Lucier. We hope this concept will help you build your business success.

Financial Statements

The two main financial statements that a small business owner should understand and review on a monthly basis are the “Balance Sheet” and the “Income Statement”. These statements will give most business owners the information needed to make good business decisions.

The formula for the Balance Sheet is “Assets minus Liabilities equals Equity”. Assets are items of value and liabilities are debts. Equity is increased by assets provided by the owner or profits. Equity is decreased by dividends to the owners or losses. A balance sheet is a snapshot in time usually the last day of a month.

The formula for the Income Statement is “Revenue (sales) minus Expenses equals Net Income”. Revenue results when you provide services. Sales result when you sell a product. The Income Statement (also called profit or loss or P&L) is for a period of time usually one month, multiple months or a year.

Cash basis accounting records expenses when paid and revenue when received and accrual accounting records expenses when incurred and revenue when earned. (ch13)

We will continue to write about these concepts in future issues. Please call us anytime with questions and feel free to pass this along to a friend.

The book “Six Steps to Small Business Success” by David Lucier CPA is available on Amazon.com or attending the seminar “Six Steps to Small Business Success” or by visiting the office of Lucier CPA Inc.

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