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Need some helping in writing an 800 word memo that explains the financial statements a small business owner should prepare at the end of each accounting period. Include a discussion regarding what information each report contains and how they might use that information to manage his business.

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Need some helping in writing a 800 word memo that explains the financial statements a small business owner should prepare at the end of each accounting period. Include a discussion regarding what information each report contains and how they might use that information to manage his business.

The most important financial statement that the owner of a small business should prepare is the balance sheet. It has two sections, one is the assets and the other is liabilities and owner's equity. In the asset section the assets are arranged from the most liquid to the least liquid. First, the current assets are listed and the first item is cash. Since cash is the most liquid of the assets, it is listed first. Other current assets like receivables and inventories are listed. Also in a balance sheet is listed depreciation which is the reduction in the value of assets over time. The balance sheet reflects the double entry system of bookkeeping in which the assets equal liabilities and owner's equity. The double entry system also creates an assurance that every transaction has been recorded properly. For instance, if the small business purchases a machine by paying cash, the interest of the owner is expressed as equity/capital and the machine is shown as an asset. The small businessman can understand that if there is an increase in assets there is an equal increase in the liability or equity. There are several ways in which the balance sheet ...

Solution Summary

small business is discussed very comprehensively in this explanation..

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