When you apply for business funding, lenders and investors want to be sure they won’t lose money on the opportunities you present. That’s why you need to bring detailed financial statements to your pitch meeting. If, however, the people you’re presenting to still feel uncertain about your company’s finances, that might be because you haven’t prepared an audited financial statement. Read on to learn what an audited financial statement is and how it differs from an unaudited financial statement.What is an audited financial statement?
An audited financial statement is any financial statement that a certified public accountant (CPA) has audited. When a CPA audits a financial statement, they will ensure the statement adheres to general accounting principles and auditing standards. Without this CPA verification, investors and lenders may not be confident the statement you’re presenting is accurate.
Types of audited financial statements
There are four primary types of financial statements that may merit auditing.
- Balance sheet: A balance sheet details your business’s total assets, shareholder equity and debts at a given point in time. It’s often thought of as a snapshot of your company’s financial performance. [Read related article: 4 Ways to Boost Your Balance Sheet]
- Cash flow statement: A cash flow statement details the amounts of cash and cash equivalents that move in and out of your company’s bank accounts. Cash equivalents include overdrafts, bank deposits, cash-convertible assets and short-term investments. For this type of statement, cash includes both cash available on hand and money stored in demand deposits.
- Income statement: An income statement, also known as a profit and loss statement, details your company’s revenue after all expenses and losses. Whereas a balance sheet is a snapshot of your company’s performance at that moment in time, an income statement captures that performance over an extended period. It usually includes metrics such as gross profits, net earnings, revenue, expenses, cost of goods sold, taxes and pretax earnings.
- Statement of shareholder equity: While often included as a portion of the balance sheet, the statement of shareholder equity can be prepared separately as well. It details all changes to your company’s value to shareholders during an accounting period. Increasing equity indicates good business practices, while decreasing equity may indicate the opposite.
source: Business.com
