In Money and Taxes in a Micro Business, you can learn about the importance of good record keeping and an important financial statement called an INCOME STATEMENT:
- An income statement is a very popular financial statement for business owners because it is easy to understand.
- An income statement (sometimes called a Profit and Loss or P&L) is a listing of business income and expenses over a period of time.
- An income statement has a bottom line called net income (or sometimes, unfortunately, net loss). Net income is total income minus total expenses.
- If you have been keeping good records then preparing an income statement is very easy.
- Balance Sheets are not usually a necessary financial statement for a micro business. They are very useful for larger businesses.
- Profit is not the same as the balance in your checking account.
It pays to prepare an income statement every month or at least several times a year to see if your micro business is profitable.
Carol Topp, CPA
