Financial statements are formal reports that summarise your business's financial position and performance. The three core statements are the profit and loss, balance sheet and cash flow statement.
Financial statements are the primary output of your bookkeeping system. They translate your raw transaction data into meaningful reports that stakeholders can use for decision-making. The three core financial statements work together to provide a complete picture: the Profit and Loss Statement shows how much you earned and spent during a period (performance), the Balance Sheet shows what you own and owe at a specific point in time (position), and the Cash Flow Statement shows how cash moved through your business during a period (liquidity). Additional financial reports include the statement of changes in equity and various notes to the accounts. Financial statements are used by business owners for management decisions, by banks and lenders for credit assessments, by investors for valuation, by tax authorities for compliance verification and by auditors for assurance. Accurate financial statements depend on accurate bookkeeping. SortBooks helps keep your financial statements accurate by fixing miscoded transactions in Xero, with your approval on every change.
SortBooks helps with the bookkeeping behind financial statements by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing financial statements by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The P&L (also called the income statement) shows your business revenue, expenses and resulting profit or loss over a specific period.
The balance sheet is a financial statement that shows your business's assets, liabilities and equity at a specific point in time. It follows the equation: Assets = Liabilities + Equity.
The cash flow statement is a financial report showing how cash moved in and out of your business during a period. It is divided into operating, investing and financing activities.
Equity represents the owner's residual interest in the business after all liabilities are deducted from assets. It includes contributed capital, retained earnings and reserves.
Bookkeeping is the systematic recording, organising and tracking of all financial transactions in a business. It forms the foundation for accounting, tax compliance and financial decision-making.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.