Business owners face tough decisions on a daily basis; and, the best way to make informed business decisions is by analyzing the company's financial statements.

Three of the most important financial statements business owners need to maintain is the

1. Income statement
2. Balance sheet
3. Statement of cash flows

These statements are like a compass to economic success and o identify the audiences, purposes and natures of financial statements and managerial reports.

The income statement is the major device for measuring profitability.  The income statement is a summary of the business's Income and expenses during a given period this could be a year, a quarter or even one month.

The balance sheet is a picture in time of the company's financial position. The balance sheet will list everything the company owns also known as assets and everything the company owes also known as liabilities.

The statement of cash flows summarizes the business's cash inflows and outflows during the period. The accounting profession has adopted a three-way classification of cash flows for external financial reporting: cash flows from making sales and incurring expenses.