An organization’s financial performance, financial status, and cash flows are all summed up in a collection of high-level reports called financial statements. Among these are the balance sheet, income statement, and statement of cash flows.
Each primary financial overview presents its conclusions as follows:
- Your income statement displays your company’s profits and losses.
- Your company’s balance sheet includes a list of its assets, liabilities, and equity.
- Your company’s cash inflow and outflow are shown on the cash flow statement.
Are you aware of the term financial statements? Generally, accounts executives in India are well about this term. Let’s begin to have a brief understanding of this term.
How to Prepare Financial Statements
The act of combining accounting data into a standardized set of financials is known as financial statement preparation. Management, creditors, lenders, and investors receive the final financial statements and use them to assess a company’s performance, liquidity, and cash flows. The following are the stages for creating financial statements: (The exact order may change from business to business.)
- First, look for receipts on supplier invoices
By comparing the receiving log to accounts payable, confirm that all supplier invoices have been received. Add the cost of any unpaid invoices to your overall budget.
- Verify Customer Invoice Issuance
Compare the shipment record to accounts receivable to confirm that all client bills have been issued. Any unprepared invoices should be issued at this time.
- Compile Unpaid Wages
Include any salaries that were earned but not yet paid as of the reporting period’s end.
- Determine depreciation
Each fixed asset in the accounting records should have its depreciation and amortization expenses computed.
- Establish the inventory’s value
To determine the ending inventory balance, perform a final physical inventory count or use another approach. Using this data, determine the cost of the goods sold, and record the result in your accounting records.
- Reconcile bank accounts
To reconcile the accounting records with the bank statement, do bank reconciliation, and record all necessary adjustments with journal entries.
- Keep track of your account balances
The subsidiary ledger’s balances must all be moved to the general ledger.
- Review the accounts
Examine the balance sheet accounts and make necessary changes to the account balances and journal entries to make them consistent with the supporting evidence.
- Examine your finances
The financial statements should be printed out and carefully reviewed for errors. Write journal entries to fix any multiple problems before printing the financial accounts again. Repeat until all of your errors have been corrected.
- Pay your taxes
Accrue income tax expenses based on the revised income statement.
- Close Accounts
All subsidiary ledgers should be closed for the current reporting period and reopened for the following one.
- Prepare financial statements
The financial statements should be printed in their final form. Create footnotes to back up the conclusions drawn from this data. Create a cover letter that summarizes the main points of the financial statements before you finish.
Share your comments on the above content. Are you seeking for accounts job in Chennai?
Check-out QWIRK. With the best financial experts, we can assist you. To find curated professionals for temporary tasks and projects in India, businesses can use QWIRK, a professional marketplace. The organization initially focused on the areas of accounting, finance, audit, and tax.