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Basic financial statements: The numbers speak to us all the time

Numbers are the universal language that governs everything that exists, however from a young age we are brought up to fear them. Even those that appear in reports as important as the **basic financial statements** of our company.

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Better decision making

_... The accountant is not the one who makes the important decisions in the organization: it is the entrepreneur who does._

Who has not heard the phrase **"math is difficult"** sometime in their life? Maybe you heard it from your parents, your friends, or your teachers.

We grow up with this idea and, by becoming entrepreneurs, we leave the responsibility of understanding numbers to our accountants, either because we don't like numbers or they make us very complicated.

Although the accountant is a key player in every company, it must be remembered that the accountant is not the one who makes the important decisions in the organization: it **is the entrepreneur who does.**

Unfortunately, many times it does so by trial and error, with no real sustenance supported by its numbers. Therefore, they are decisions made blindly. It's like going through a minefield with a blindfold! The risk of stepping on a bomb when walking is enormous.

**👍📖** **Recommended reading:** **"What you need to know to keep the accounts of a business"** **.**

The importance of measuring instruments

Another analogy would be like driving a car without mirrors and without a dashboard; We could exceed the speed limits and be fined, we could run out of gas at any moment, or our engine could burn out due to lack of oil.

Every instrument in a car was designed to take preventive measures, saving us enormous amounts of time and money. Even with them, it is not possible to eliminate the risks one hundred percent, but they can be significantly mitigated.

This is exactly what **numbers do in our company: they are the instruments that allow us to reduce risk in decision-making**, which increases our chances of success.

**Main financial statements**

**Financial statements** are the financial quantification of your company. They are more than an **accounting** exercise: they are an accurate and objective picture of it. Everything in your financial statements reflects something tangible.

That said, the two most important financial statements are the **balance sheet** and the income **statement**.

**Balance sheet**

You can understand your **balance sheet** as a "snapshot" of your assets at a specific point in time (how much you have in your company), your liabilities (what your company owes to others) and the owner's equity (what remains for the owner and investors after covering the liability).

This report describes the health and financial worth of your business.

**Read More:** [PropertyNews](https://propertynews.pk/)

**Statement of income**

For its part, your income **statement** shows your income, costs, and related expenses during a specific period of time, usually a month, a quarter or a year.

That is, it describes the financial performance of your company.

**Other basic financial statements**

Honorable mention has the trial balance as one of the basic financial statements. This report seeks to verify that the debit and credit balances are equal.

Given its usefulness as a step prior to generating the balance sheet and income statement, the **trial balance** is considered one of the pillars of accounting.

**👍📖** **Recommended reading:** **"What financial statements should an SME have?"** **.**

**The power of numbers**

_It is the numbers that tell you the direction to follow, it is the numbers that tell you your past, your present and your future._

**Numbers speak to us all the time** to tell us stories, but unfortunately few entrepreneurs understand them so that they can make the right decisions at the right time.

It is the numbers that tell you the direction to follow, it is the numbers that tell you your past, your present and your future. Learning this language can make the difference between the success or failure of your business.