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Report Thread starter 4 weeks ago
May sound like a stupid question, but I dont understand why small businesses need bookkeepers to create income statements or balance sheet statements for them when their income and expenses are literally in their bank statements...
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Report 4 weeks ago
It depends if the business uses accrural accounting or cash accounting. Accrural accounting will mean that all revenues, assets, and liabilities are not accounted for. Other adjustments you will need include provisions for bad debt, depreciation. Petty cash transactions won't be accounted for in bank statements.

The financial statements will also present a clearer picture that you can't see from a bank statement alone e.g. the financial performance of a company (income statement), and the financial position of the company (balance sheet). You cannot see what assets and liabilities you have just by looking at what items there are in the bank statement. Debtor and creditor accounts may contain balances that you can't see in a bank statement.

On a bank statement, you can mistake equity/loans injected into the company as revenues, and asset purchases as expenses. VAT won't also be properly accounted for, as it comes out every quarter/month, and it's not correct to account for VAT as part of operating expenses.

If the business is simple, does not charge VAT, based solely on cash accounting, requires no start up capital, has virtually no assets or liabilities, you may get away with saying that what you see in your bank statements is what the financial statements will be, but it's unlikely.

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