The term GAAP, or “generally accepted accounting principles,” refers to a set of accounting policies and procedures used in the formal compilation of financial statements. Some part of GAAP come from formal accounting standards from various boards and agencies, and some come from industry standards.
In tax and accounting terms, “income statement” refers to an accounting of a business’s revenue and expenses for a period of time. This is also often referred to as a “profit and loss” statement (“P and L” for short).
A balance sheet is a summary of a business’s assets, liabilities and equity.
NOTE: I write this post in 2014, so be aware of its age. The content is still useful. —– In an ideal world, small business owners would review financials statements and budgets on an ongoing basis. In the real world, the day-to-day struggle of running a business, paying bills and keeping customers happy causes the […]