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It’s that time of year again: tax season is upon us. Close your books and get ready to file!
It sounds so simple, doesn’t it? Just get your accounting cleaned up and organized. But I know it isn’t easy for many small business owners—like I always say, you didn’t start your business to do bank reconciliations (but I did!).
Got this one here.
Every year we get clients who come to us in a panic, because they can’t quite figure out how to make something work in QuickBooks, or what basic reports they should be looking at. So today, let me head you off at the pass and tell you how to get a Balance Sheet and Profit & Loss Statement from QuickBooks.
Your Profit & Loss Statement, also called an Income Statement, is a pretty darn important document. You’ll want to review this more than once a year when you send documents to get your taxes prepared. Personally, I like to review the P&L for Kildal Services about once a week—sometimes more. Essentially, your P&L summarizes your business’s financial performance over a period of time—daily, weekly, monthly, quarterly or annually.
A balance sheet is a statement of the assets, liabilities, and equity of a business—essentially a “snapshot” of your business value. This is done by subtracting your liabilities, or what you owe, from your assets, or cash, property, and what you’re owed. What you get is the equity, or what your company is worth. It’s useful for accountants to see your financial health and for banks when you are applying for loans. It’s also essential for the small business owner to get a true sense of how the business is doing.
Just as with a P&L, the standard balance sheet is fine, but I recommend pulling the balance sheet detail to send to your tax preparer. As you can guess, it’s a more detailed version of the standard balance sheet, showing the starting balance at the beginning of last month, transactions entered in for the month, and ending balances.
To view the Balance Sheet, we’ll start the same way we did with the P&L.
Now that you know what each of these reports are, and how to get to them, let’s recap what you’re looking at with each report:
Summary of revenue, expenses, and profit or loss during a specific time period
“Snapshot” of your company’s value, as of a specific date
See how easy that is?
The only trick is to make sure you have your books up to date.
Remember: Each report serves a different purpose. The P&L statement answers an important question: Is your company profitable? The balance sheet shows the company’s value more broadly, revealing what the company owns and what is owed to vendors or creditors.