Financial Statements: Best Way to Prepare Financial Statements

Financial statements are a set of high-level reports that summarize an organization's cash flows, financial performance, and financial condition. The statement of cash flows, income statement, and balance sheet are among them.

Here's how each main financial summary shows its findings:

Profits and losses of your company are shown on your income statement.

The assets, liabilities, and equity of your company are listed on a balance sheet.

The cash flow statement depicts the money coming in and going out of your company.

Financial Statements: How to Prepare Them

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 completed financial statements, which they use to assess a company's performance, liquidity, and cash flows. The steps for preparing financial statements are as follows: (the precise order may vary from company to company).

Step 1: Check Supplier Invoices for Receipt

Ensure that all supplier invoices have been received by comparing the receiving log to accounts payable. Accrue the expenditure for any invoices that have not been received.

Step 2: Verify Customer Invoice Issuance

To ensure that all client bills have been issued, compare the shipment log to accounts receivable. Any invoices that have not yet been prepared should be issued.

Step 3: Accumulate Unpaid Wages

As of the end of the reporting period, add an expense for any wages earned but not yet paid.

Step 4: Depreciation Calculation

All fixed assets in the accounting records should have depreciation and amortization expenditure computed.

Step 5: Determine the worth of your inventory

Conduct a final physical inventory count or use another method to estimate the ending inventory balance. Calculate the cost of products sold using this information and enter the value into your accounting records. Are you looking for some finance professionals to help you with the same?

Step 6: Reconcile Bank Accounts

Perform bank reconciliation and make journal entries to record all necessary adjustments to reconcile the accounting records with the bank statement.

Step 7: Keep track of the balances in your accounts.

All balances from the subsidiary ledger should be transferred to the general ledger.

Step 8: Examine the accounts

Examine the balance sheet accounts and modify account balances with journal entries to match the supporting documentation.

Step 9: Examine your finances

Print a rough draft of the financial statements and double-check them for inaccuracies. If there are several errors, write journal entries to correct them and reprint the financial statements. Replicate until you've fixed all of your mistakes.

Step 10: Pay Income Tax

Based on the updated income statement, accrue income tax expenditure.

Step 11: Close Accounts

Close all subsidiary ledgers for the period and reopen them for the next reporting period.

Step I2: Prepare Financial Statements

The financial statements should be printed in their final form. Make footnotes to support the claims based on this data. Finally, prepare a cover letter that summarises the key features of the financial statements. After that, put together packages with the information and distribute them to the normal list of recipients.

Hope the above content has helped you with the understanding of financial statements.

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