Question

Discuss the importance and uses of financial records in a small business.

Answer 1

Three important financial records in a small business are-

1. Balance sheet
2. Profit and loss statement
3. Cash flow statement

Importance of financial records are-

1. It gives us the information about the financial health of the organisation.
2. Track the incoming and outgoing fund of the business.
3. Help company to identify area of concern and improve the overall business efficiency.
4. Help to take decision regarding expansion and forecasting.

Useoffinancial record-

1. Profit and loss statement help us to understand how much profit or loss a company made during a financial period.
2. Balance sheet capture financial health of the business during a particular period.
3. Cash flow statement anticipate income and expenditure during and upcoming period.