Managing and understanding your QuickBooks financial reports can be a difficult task if you do not know what the five most important numbers in your bookkeeping mean. This is why it is always a good idea to seek professional guidance when you are trying to understand what your numbers represent. But to better understand your QuickBooks financial reports here is a quick review of those numbers and what they mean for understanding where your business is at financially.
1 – Liabilities
Liabilities are debts. This number is found on your balance sheet. Liabilities are the numbers in your QuickBooks file that denote what bills are outstanding or owed. Examples include unpaid rent and utilities for your office, loans due and unpaid insurance. It is important to keep track of these liabilities for cash flow planning purposes because they factor into the overall costs that your business is going to incur going forward.
2 – Expenses
Expenses are costs or charges. Expenses are different than liabilities because they involve items that have been paid. Some expenses can be written off when they are paid, such as rent and utilities while others like vehicle loan payments must factor in depreciation and should be handled under the direction of an accountant.
3 – Assets
Assets are the property or total resources your business owns; for example buildings, equipment, furniture and vehicles. This number is available on your balance sheet in your QuickBooks software and is yet another important number to look at.
4 – Revenue
Revenue is income. Simply put it is the amount of money you make. In your QuickBooks file printing out the year to date profit and loss statement will tell you where your business is at from a revenue standpoint. More revenue in relation to your spending means more money for your business.
5 – Owners Capital or Equity
Owners Capital or Equity is your net financial interest in your business. Your assets minus your liabilities equals your equity or the financial net worth of your business. QuickBooks software provides owners with easily accessible Balance Sheet and Profit and Loss Financial Statements so you can manage and grow your business.
The author: Dawn Contardi, owner of Sharp Bookkeeping Service, a Certified QuickBooks ProAdvisor and a member of the American Institute of Professional Bookkeepers with 25 years of experience can be reached at 732-458-3800 or contact us.