Financial Statements are the primary output from an accounting system. The balance sheet and profit and loss statement provide a picture of the status of a company at a given point in time. Decisions can be made on what management focus should be going forward in order to achieve success. The primary statements are:
- Balance Sheet – This financial statement reports an auto repair shop’s assets and liabilities at a specific point in time. The assets are what the company owns and the liabilities are what the company owes. It can be used to determine different measures – most commonly the debt-to-asset ratio. This is calculated by dividing the total liabilities by total assets. A ratio that reflects assets higher than liabilities generally depicts a healthy balance sheet.
- Profit and Loss Statement – This financial statement is a summary report of revenues, costs and expenses for a given accounting period. The report depicts the relationship between revenue and costs and the ability or need to generate profit by increasing sales, lowering costs or both. The profit and loss statement (or P&L) is a very important tool in financial management.