Financial Reporting Frequently Asked Questions

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 Financial reporting involves preparing accurate financial statements—like your profit and loss, balance sheet, and cash flow statement—so you can understand your business performance and make informed decisions. 

 Typically, you should receive a Profit & Loss (Income Statement), a Balance Sheet, and a Cash Flow Statement. 

 Not safely. Your bank balance doesn’t reflect pending liabilities, receivables, or expenses. Financial reports give you the full picture. 

 At minimum, monthly. Regular reviews help catch issues early, track performance, and stay tax-ready. 

  Cash basis tracks income/expenses when money moves. Accrual basis records them when earned or incurred. Accrual is more accurate for understanding true performance and is often required for compliance. 

 Look at revenue trends, expense breakdowns, and net profit. Are expenses growing faster than income? Are you overspending in a certain category? 

 It shows your business’s financial position: assets, liabilities, and equity. It helps assess debt load, cash reserves, and financial health over time. 

  Because net profit doesn’t reflect loan payments, credit card activity, owner draws, or accounts receivable/payable. These appear in other statements like the Balance Sheet and Cash Flow Statement. 

 Yes. Financial reports help identify deductible expenses, potential write-offs, and timing strategies. We use them to plan proactively with your tax professional. 

 It shows performance over multiple periods (month-to-month, year-over-year). This helps identify trends, seasonality, and growth opportunities. 

  Incorrect reports can lead to IRS penalties, audits, or poor financial decisions. That’s why it’s crucial to have accurate, reconciled books—and professionals who know how to prepare compliant financial statements.