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Basic Business Accounting Principles and Practices

Rain Carlson
Rain Carlson
Business accounting is a complex and abstract concept, but it’s vital to running a successful business. Experienced professionals must understand this topic to make informed decisions and lead a company. This article will cover some essential concepts and financial statements crucial to business accounting. These include balance sheets, income statements, and cash flow statements. Before launching a company, owners should be familiar with these topics to make sound financial decisions and manage their finances properly. It is crucial to understand the fundamentals of business accounting to ensure the success and longevity of any venture.

Balance Sheet

The balance sheet - also referred to as a “Statement of Financial Position,” shows what your business owns and owes at a fixed period in time. This statement shows a complete depiction of a company’s financial situation. The balance sheet is a crucial indicator of how your business is doing. Investors will see this on the stock exchange when they buy shares.

A balance sheet is a valuable tool for investors because it assists them in knowing if they are making wise investment decisions. The balance sheet is one of the most critical statements in business.

Income Statement

An income statement is an accounting record showing how much your company generated and spent over time. This statement shows how much revenue your business has generated and lists what resources (costs) your business has used to operate.

Cash Flow Statement

The cash flow statement is the accounting record showing the money exchange between your company and the outside world over time. The cash flow statement tracks the money your business receives and the resources used to maintain operations. This statement will include products, services, and exchanges with suppliers. The cash flow statement shows you how much your business has left over at the end of the month. This statement is critical as it provides insight into profitability.


By understanding the fundamentals of accounting and the importance of the balance sheet, income statement, and cash flow statement, you can make informed decisions and proactively guide your business, giving you a view of what might potentially lay ahead. If you need to understand these documents better and how to use these statements to run your business, reach out to Rain. I am standing by to assist you with all your accounting needs.

Rain Carlson
Written by

Rain Carlson

I help business owners get peace of mind through best accounting systems implementation, strategic planning and tax services, empowering clients to focus on the growth and development of their business and make well-informed decisions.