Financial Statements for Small Business Guide
How the balance sheet, cash flow statement and trial balance fit together for a small business, with a step-by-step order and a free template for each.
Financial statements for small business can feel like three separate chores: a balance sheet, a cash flow statement and a trial balance that someone mentioned once. They're really one set of numbers shown three ways. This guide explains what each one tells you, how they connect, and the order that makes them easiest to prepare. Each section links to a free template so you can try it with your own numbers.
Everything here is general bookkeeping information. The templates run in your browser, and nothing you enter is uploaded, sent or stored.
The three, in one sentence each
Trial balance: a list of every account with its debit or credit balance, used to check that the books balance.
Balance sheet: what the business owns, owes and has left for the owner on a single date.
Cash flow statement: where cash came from and where it went over a period, starting from net profit.
You'll often hear about the profit and loss statement alongside these. It shows income, costs and net profit over a period, and it sits between the trial balance and the other two. There's a free Profit and Loss Template for Small Business for that too.
What each one is for
Trial balance: the check
A trial balance lists each account's ending balance in a debit or a credit column and adds both columns. If the totals agree, the books are in balance. That doesn't prove every entry is right, only that the totals match. If they don't match, the difference points you toward a missing entry, a one-sided entry or a number typed backwards.
Use the full Trial Balance Template page for the steps and hints.
Balance sheet: the snapshot
A balance sheet shows assets (what you own), liabilities (what you owe) and owner's equity (what's left) on one date. The two sides must agree: assets equal liabilities plus owner's equity. It answers questions like how much cash you hold, what customers owe you and what you owe vendors and lenders on that day.
Use the full Balance Sheet Template for Small Business page.
Cash flow statement: the movement
A cash flow statement explains why cash went up or down over a period. It starts from net profit, adjusts for things that didn't move cash (such as depreciation and changes in what customers owe you or you owe vendors), then adds investing and financing activity, such as buying equipment, borrowing and repaying loans and owner draws. The result should land on your ending cash.
Use the full Cash Flow Statement Template page.
How they fit together
The trial balance is where every account balance sits, so it feeds both the profit and loss and the balance sheet. Income and expense accounts go into the profit and loss. Asset, liability and equity accounts go into the balance sheet.
Net profit from the profit and loss becomes part of owner's equity on the balance sheet, and it's also the starting line of the cash flow statement.
The change in each balance sheet account between the start and end of the period (customers owe you more, vendors are owed less, and so on) is what the cash flow statement uses to turn profit into cash.
Ending cash on the cash flow statement should match the cash on the balance sheet and your bank and cash accounts. When all three agree, you have a good sign the books tie together.
If one number won't tie, it usually shows up first in the trial balance or in a bank account that hasn't been reconciled.
A plain step-by-step order
Reconcile every bank and card account to its statement for the period.
Run the trial balance and confirm debits equal credits. Fix any difference before moving on.
Build the profit and loss for the period from the income and expense balances.
Build the balance sheet as of the last day of the period and check that assets equal liabilities plus owner's equity.
Build the cash flow statement from net profit and the change in each balance sheet account.
Compare ending cash with your bank and cash balances.
Read the statements as a set, not one at a time. A profit with falling cash is a prompt to look at receivables, inventory and loan payments.
Share the finished statements with your accountant or other professional once they tie.
Which free template to use
Check that debits equal credits: Trial Balance Template
See what you own, owe and have left on one date: Balance Sheet Template for Small Business
See why cash moved over a period: Cash Flow Statement Template
See income, costs and net profit: Profit and Loss Template for Small Business
Browse every template in one place: Free Bookkeeping Templates
Keep the statements honest in QuickBooks®
Use the same period end date for every statement.
Reconcile accounts before you run any report, and re-run the reports after you correct entries.
Pull the trial balance, balance sheet and profit and loss from your QuickBooks reports so your template numbers match your books. The month-end checklist walks through the close: QuickBooks month-end close checklist.
What this guide is not
It's general bookkeeping information and a set of calculators that work from your numbers. It isn't accounting, financial or legal advice, and your accountant may adjust items in finished statements.
Want help with your monthly statements?
If the trial balance won't balance or the cash doesn't tie to the bank, the books underneath need attention first. LiveFixPro Bookkeeping is a remote U.S. bookkeeping firm. Published prices are $1,999 fixed one-time for Cleanup for QuickBooks Users and $499/mo for monthly bookkeeping. What each includes is confirmed on the free consult. See our bookkeeping services and plans, or book a free consult and we'll talk through where your books stand.
FAQ
What are the main financial statements for a small business?
The usual set is the profit and loss statement, the balance sheet and the cash flow statement. The trial balance is a checking worksheet behind them: it lists every account balance so you can confirm debits equal credits before you build the statements.
What is the difference between a trial balance and a balance sheet?
A trial balance lists every account, including income and expenses, in debit and credit columns to check the totals agree. A balance sheet shows only assets, liabilities and owner's equity on one date, arranged so assets equal liabilities plus equity.
Why does my cash flow statement show a different number from my profit?
Profit counts income and expenses when they're recorded, while cash flow counts when money actually moves. Unpaid invoices, bills you haven't paid yet, inventory purchases, loan payments and owner draws all make the two differ. The cash flow statement walks through those differences.
What order should I prepare the statements in?
Reconcile your bank and card accounts first, run the trial balance to confirm it balances, then build the profit and loss, the balance sheet and finally the cash flow statement. Compare its ending cash with your bank balance.
When is it time to hand the statements to someone else?
If the trial balance won't balance, the cash doesn't tie to the bank, or you're not sure which numbers to trust, it's worth having a bookkeeper review the books. Once the books are in order, share the statements with your accountant or other professional.
Try the three templates
Start with the trial balance template, then the balance sheet and cash flow statement, and book a free consult if the numbers won't tie.
QuickBooks® is a registered trademark of Intuit Inc. LiveFixPro is independent and not endorsed by Intuit.
QuickBooks® is a registered trademark of Intuit Inc. LiveFixPro is independent and not endorsed by Intuit.
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