Idaho Business Financial Statements Explained
Accountants supply information to people both inside and outside the Idaho business by issuing formal reports that are called financial statements.
The financial statements are usually issued at least once a year. In many cases, they are issued quarterly or more often where necessary. A set of rules, called General Accepted Accounting Principles GAAP, govern the preparation of the financial statements. GAAP has been defined as a set of objectives, conventions, and principles to guide the preparation and presentation of financial statements. These rules can be found in volumes of documents issued by the American Institute of Certified Public Accountants AICPA, the Financial Accounting Standards Board FASB, the Internal Revenue Service IRS, and the Securities and Exchange Commission SEC.
The basic financial statements include:
- Balance sheet
- Income statement
- Statement of cash flows
- Statement of retained earnings
Idaho Business Retained Earnings Defined
Understanding cash and retained earnings can be confusing. These earnings in a business are not equal to cash; this is money in the bank. Just because an Idaho company has kept profits in the Idaho business over the years does not mean that all of these profits have been retained in the form of cash.
After an Idaho company earns a profit, it may take that cash and purchase assets or pay off some of its liabilities (expenses, loans, bills, etc.). Idaho Business owners often assume that they are doing well because they are making profits without considering the amount of cash they have at their disposal. If they do not have sufficient cash, they will find themselves in dire since they may not be able to make the payroll, pay their taxes or general bills.
- It is essential that businesses have a good cash management plan.