Financial statements explained for business owners

What the financial statements explained for business owners gives you

Financial statements tell you how the business is doing, but only if you can read them. This guide explains the profit and loss account, the balance sheet and the cash flow statement in plain language, uses one worked example to show how they fit together, shows the key ratios and lists questions to ask each month.

Who it is for

Business owners, managers and new accountants who want to understand their numbers.

How to use it

1. Read the three statements in order.
2. Follow the worked example.
3. Take your own statements and answer the questions.
4. Track the key ratios every month.
5. Keep a signed or dated copy with your records, so you can show what was agreed or done.

What is inside

• Profit and loss, balance sheet and cash flow
• How the three statements fit together
• A worked example
• Five key ratios
• Questions to ask every month

The document is a ready-to-print PDF with these parts: The three statements, A worked example: profit and loss, The balance sheet, Five ratios worth watching, Questions to ask each month. It is laid out for A4, with the headings, tables and tick boxes already in place, so you can print it and fill it in by hand, or type into it with a PDF editor.

Tips for getting it right

• Look at the trend, not one month.
• Compare against the budget and last year.
• Profit is not the same as cash; watch both.
• Ask your accountant to explain anything you do not understand.

Why it helps

Accounting records let you answer three questions at any time: what came in, what went out and who owes whom. Kept consistently they also make tax returns, loan applications and the sale of a business much easier, because the evidence is already organised. Entering transactions the day they happen is far cheaper than reconstructing them at year end.

Questions people ask

Can I edit it? It is a PDF, so it is meant to be printed and completed, or filled with a PDF editor. If you want to change the wording, copy the text into Word or Google Docs and adapt it to your business.

Is it legal advice? No. It is a practical starting point written for Kenya. Rules change, so check the current position and ask a professional where the stakes are high.

Will it work on my phone? Yes for reading. For filling in and printing, a computer or a PDF app works best.

Keeping it safe and up to date

Good accounting records are a legal duty as well as a management tool: keep the supporting receipts and invoices with the workbook, and keep each year's copy for at least five years. Work on a copy, never on your only file, and back it up.

Read how to keep business records for KRA for the wider picture. Free calculators that go with it: Corporation tax calculator. See more accounting templates or ask us for a custom one.

This document is general information, not tax, legal or accounting advice, and it is not affiliated with the Kenya Revenue Authority. If something does not work as described, contact us and we will put it right.

Related guides, calculators and templates

• Free calculator: Corporation Tax Calculator
• Guide: How to choose accounting software for a small business
• Guide: How to run a month-end close for a small business
• Guide: How to read a balance sheet: a guide for small business owners in Kenya
• Another template: Audit preparation guide for small businesses
• Another template: Branch and department profit and loss
• Another template: Monthly profit and loss statement

Need something different? Request a custom template, browse all guides or see every Excel template.