A financial statement is a document containing information about the financial position of a company or enterprise, which includes the balance sheet, income statement and cash flow statement. Financial statements are frequently reviewed and reviewed by business analysts, the board of directors, investors, financial analysts, and government agencies. Reports must be prepared and submitted on time, be accurate and free of errors. While preparing a financial statement may seem like an overwhelming task, there is nothing difficult in collecting the necessary reports.

Steps

Part 1

Preparation for writing

Determine the time frame. Before you get started, you need to decide what time frame your report will cover. Most financial statements have a quarterly or yearly periodicity, although some companies prefer to report every month.

To understand what time frame your financial statement should cover, review your organization's regulations, such as legal regulations, business articles or articles of association. These documents may contain information on how often the financial report should be prepared.
Ask your business manager how often he wants to receive financial statements.
If you are the manager of your own business, choose the most suitable day for summing up financial results and use it as the date for preparing the financial report.

Review the ledgers. Next, you need to make sure that the information in your ledgers is up to date and properly recorded. Your financial statements will be useless if the underlying accounting data are not correct.
- Ensure that all accounts payable and receivable have been processed, bank reconciliation has been prepared, and inventory purchases and sales have been recorded appropriately.
- You should also take into account the presence of possible debt, which may not have been recorded at the time of drawing up the financial report. For example, did the company use any type of service that was not billed? Does the company have wage arrears to its employees? These facts represent your accumulated debt and should be reflected in the financial statements.
Collect any missing information. If an audit of the ledgers reveals that some of the information is missing, trace all documents related to it to ensure that your financial statements are complete and correct.

Part 2
Balance sheet preparation
1. Prepare your balance sheet. The balance sheet contains data on assets (what the company owns), liabilities (what it owes) and equity, such as common stock and additional capital. Title the first page of your financial statement Balance Sheet, followed by the name of the business and the date the balance sheet was certified.
  - Data on the state of the balance sheet are given as of a certain day of the year. For example, the balance sheet may be prepared as of December 31st.
2. Draw up your balance sheet accordingly. In the financial statement, assets are usually listed on the left and debt / equity on the right. On the other hand, some people place assets at the top and debt / equity at the bottom.
  
  List your assets. Name the first section of the balance sheet "Assets" and list all the assets owned by the organization.
  
  List your debts. Debts and equity should be presented in the next section of the accounting report. Name this section "Debt and Equity."
  
  List all sources of home equity. After the section on debts, there should be a section with information on equity, which shows how much cash the company will have if it sells all its assets and pays off all the debt.
  - List all items of equity, including ordinary shares, treasury shares, and cash reserves. Then add them up and label them as Total Equity.
3. Add up debt and equity. Add the total of Total Debt and Total Equity together. Name the resulting value "Total debt and equity."
  
  Check your balance. The figures obtained in the sections "Total assets" and "Total debt and equity" must match the balance sheet. If so, the preparation of the balance sheet is completed, and you can proceed to the preparation of the statement of financial results.
  - Equity must correspond to the difference between total assets and total liabilities. As already mentioned, this is money that would have remained after the sale of all their assets and the payment of all debts. Therefore, the sum of liabilities and equity should be equal to assets.
  - If the balance doesn't add up, double-check your calculations. You may have missed or misidentified one of your accounts. Double-check each column separately and make sure you haven't missed anything. You could have missed out on a valuable asset or significant debt.
Part 3
Preparation of a statement of financial results
1. Start writing your income statement. The statement of financial results contains data on how much money the company has made and spent over a certain period of time. Title this page of your report as the "Statement of Financial Performance" and then include the name of the business and what period of time this report covers.
  - The statement of financial results often covers the period from January 1 to December 31 of a particular year.
  - Note that you can prepare a financial statement for one quarter or a month, but include an income statement for the entire year. While not required, your financial statement will be easier to understand if it covers the same period.
2. List the sources of income. List the various sources of income and amount of profit.
  - Be sure to list each type of income separately, while making sure to take into account any discounts and markups. For example: "Sales, 800,000 rubles" and "Provision of services, 400,000 rubles."
  - Indicate the sources of income with the maximum benefit for the company. You can break down revenues by geography, management group, or specific product.
  - After listing all sources of income, add them together and enter in the "Total income" column.
3. Indicate the costs of the item sold. This refers to the total cost of developing or manufacturing your product or providing services for the reporting period.
  
  Enter retained earnings. Retained earnings are the sum of net profit and net loss since the foundation of the company.
  - Summing up the retained earnings since the beginning of the year with net profit or loss, we get the total balance sheet profit of the company.
Part 4
Preparation of a cash flow statement
1. Start creating a cash flow statement. This report tracks the company's cash inflows and outflows. Title this page as "Cash Flow Statement" and include the name of the business and what time period this statement covers.
  - Similar to the income statement, the cash flow statement often covers the period from January 1 to December 31.
2. Start with the operations section. The cash flow statement usually begins with a section entitled “Cash flows from operating activities”. This section is the same as the income statement you have already prepared.
  
  Write a section on investment activities. Add a section titled Investing Cash Flows. This section corresponds to the balance sheet statement you have already prepared.

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How to prepare convenient and understandable financial statements?

I am a convinced supporter that any management information should be read easily and freely. If the report cannot be read "at first sight" - the place of such a report is not on the table, but in the trash can.

If there is too much information, in order to form a complete picture of what is happening in your head, you have to look through a lot of reports (each of which takes more than one page!), And then "put the puzzle" in your head.

It's much better to do it differently: use the information that we already have and immediately put it into a convenient picture.

If you strictly follow the reporting rules, the information will always be readable and easy to understand. These are the rules:

Principle one
The logic of the report should be immediately visible - therefore, any report (no matter how important it may be!) Should fit on one sheet;

Principle two
One report that contains many numbers is much worse than many reports, each of which contains few numbers;
Principle three
If you want to decipher or detail any indicator - decipher no more than two parameters simultaneously.

Now let's take a look at these principles in practice.

Honestly, at first I wanted to come up with an example that would show how to make a report correctly. But instead I decided to take a real financial report (all figures in the report have been changed), which was brought by one of the participants in my seminars and which we brought into a "digestible" form right at the seminar.

In this report, the articles remained unchanged, but their more convenient layout was applied, which made the calculation logic clearer. The report has shrunk - the indicators that needed to be deciphered are included in an additional report. What happened is for you to judge ...

It was:

Became:

And two transcripts:

Well, I think that with the first principle (to make clear logic and arrange everything on one sheet) everything is clear. Again, the second principle is partly at work here - it is better to have more reports, in each of which there will be fewer numbers.

Now let's start with the second (more reports - fewer numbers) and the third (decrypt a maximum of two parameters) principles.

The main problem of most of the reports is that they strive to shove everything in one report. This is not worth doing. Not so long ago I saw a sales report from one of the clients. I can't vouch for the accuracy of the content, but it looked something like this:

And such a table - ten sheets !!!

What they want to see from such a report is completely incomprehensible ... The maximum that can be squeezed out is to work with the autofilter.

It will look something like this:

Or like this:

Now let's try to make readable reports out of this garbage. I warn you right away - there will be a lot of them.

First three:

The next step is to combine the parameters by which the report can be decoded in two. There are three options:

Product x Manager

Buyer x Manager

Item x Buyer

The following three reports:

Instead of one report, as many as six appeared. But six clear reports turn out to be much more convenient than one incomprehensible one. And mind you - I managed to do all this in ten minutes with the help of Excell!

I talk in more detail about how to create simple and understandable financial reports at my training. « » .

Each year the company prepares final financial statements - balance sheet and profit and loss account. It is important to be able to read and understand the meaning of these reports.

1. The balance sheet contains information about the financial condition and results of the enterprise at a certain point in time. From the balance sheet, you can find out where the funds invested in this business came from and where they were placed at the time of the balance sheet. The balance sheet reflects all transactions carried out in the course of the economic activity of the enterprise.

2. Assets are all material resources that have a monetary value and are at the disposal of the enterprise. Assets are classified into tangible and intangible assets. Tangible assets are the property of an enterprise (for example, buildings, equipment, machinery, vehicles, stocks of raw materials). Intangible assets are defined as the ownership of any right (for example, a patent or the right to make a profit in the future). All assets included in the balance sheet have a monetary value. However, important factors such as the managerial ability of staff, good industrial relations and morale cannot be included in the balance sheet.

Non-current assets have a fairly high value and a long term of use by the enterprise (buildings, structures, land, machinery, equipment, vehicles, etc.). Due to the fact that the cost of non-current assets is very high, it is not deducted from the profit in the year of acquisition, but is allocated over the expected useful life in the form of depreciation charges. Current assets are cash and balance sheet items that can be quickly and easily converted into cash. Examples of current assets are stocks of finished goods and accounts receivable (customer debt to the enterprise).

3. Liabilities Liabilities are financial liabilities of the enterprise. They arise from the use of credits or loans. Depending on the maturity date, there are short-term and long-term liabilities.

Short-term liabilities are payables payable within one year (trade creditors, bank overdraft). Long-term liabilities are accounts payable that are payable in more than one year. Long-term liabilities include bank loans (but not bank overdrafts, which are repaid on demand) and outstanding lease amounts.

4. Equity Equity is the value of all assets of an enterprise after all debts have been paid. The balance sheet is based on the following balance sheet equation: equity \u003d total assets - total liabilities \u003d non-current assets + current assets - short-term liabilities - long-term liabilities The equity capital of an enterprise at a specific date can be calculated differently: equity \u003d initial investment + retained earnings where retained earnings are profits reinvested in the course of business.

Retained earnings represent the balance of earnings after tax, interest and dividend payments. As a rule, it constitutes a significant part of the financing of new capital investments.

5. Statement of cash flows The balance sheet contains information about the financial condition and results of the enterprise at a certain point in time. But in the statement of cash flows cash flows are reflected, that is, the actual physical movement of funds from one hand to another in the form of receipts and payments that take place in the course of the economic activity of the enterprise. Receipts are cash received by the enterprise. Payments are money donated by an enterprise. Each time the business issues a check, a cash payment is generated. If the check is issued to the company, then there is a cash flow. Therefore, there is little opportunity to distort the real state of affairs in the enterprise. The increase in the company's liabilities is a source of funds. A decrease in the company's liabilities indicates the use of funds. A decrease in the assets of an enterprise is a source of cash.

The increase in the company's assets indicates the use of funds. The cash flow statement reflects changes in the cash position over a certain period of time. The balance at the beginning of the period is the amount of the company's cash at the beginning of the period. The balance at the end of the period is the amount of the company's cash at the end of the period. Cash flow is calculated using the following formula: balance at the beginning of the period + receipts - payments \u003d balance at the end of the period The cash flow statement is not without its drawbacks. It reflects the current situation and is historical in nature. For an investor interested in the company's solvency, it would be more useful to forecast the company's cash flow.

6. Profit and loss account The profit and loss account shows the income and expenses of the company from operations between two adjacent dates of the balance sheet. From it you can see the results of the enterprise for this period: whether it made a profit or incurred losses. When compiling the profit and loss account, income and expenses are recognized not when they are paid in cash, but when they are accrued. For example, the sale of goods is considered a fait accompli when the seller has fulfilled the terms of the sales contract, and not when money is received for the goods. Income is recognized as received if it can be objectively estimated and it is reasonably assumed that the receipt of funds in the future. The profit and loss account is built on an accrual basis, which more accurately compares the income received and the expenses incurred for the period under review. This allows you to determine the actual values \u200b\u200bof income and expenses, but many cash transfers are not shown.

The profit and loss account does not reflect everything that happened at the enterprise during the reporting period. It does not contain information about facts that cannot be accurately estimated (for example, the hiring of a new employee). Also, the profit and loss account does not reflect non-sale transactions (for example, the issue of new shares). P&L account data is much easier to manipulate than cash flow statement data. On the other hand, the profit and loss account allows, for example, to unambiguously distinguish between the payment for the electricity consumed last month and the payment for the building that the company will rent for the next 15 years.

7. Calculation of profit Sales volume is the income from the sale of products. The cost of goods sold shows how much it cost an enterprise to purchase or manufacture goods. Gross profit is calculated according to the following formula: gross profit \u003d sales volume - cost of products sold Under expenses we mean overhead expenses incurred in the course of sales for a certain period of time. Net profit is calculated using the following formula: net profit \u003d gross profit - expenses Example. In April, sales amounted to 200,000 rubles. The cost of products sold is equal to 90,000 rubles, and expenses (rent, salary, etc.) - 30,000 rubles. We determine the gross profit and net profit. Gross profit \u003d sales volume - cost of products sold \u003d 200,000 - 90,000 \u003d 110,000 rubles. Net profit \u003d gross profit - expenses \u003d 110,000 - 30,000 \u003d 80,000 rubles. The profit of an enterprise can depend on a number of artificial factors. For example, if a company merges with another company, the total profit will increase. Remember that profit and cash are not the same thing. The profit and loss account reflects income and expenses for a certain period of time.

But some expenses (rent, insurance, etc.) can be prepaid. Profit is just one indicator. Therefore, when analyzing the results of an enterprise's activity, it is necessary to focus not only and not so much on profit as on a set of indicators characterizing the financial and property potential of the enterprise.

8. Notes to the financial statements An enterprise accompanies its financial statements with notes. These explanations contain: 1. information about the accounting methods used (the method of calculating depreciation, the method of assessing the stocks of inventories, etc.); 2. a detailed description of some items of assets and liabilities (terms and conditions of debt repayment, terms of payment of rent, etc.); 3. information on the structure of the share capital of the enterprise (conditions of ownership of shares, etc.); 4. information about the main operations (acquisition of another enterprise, separation of a previously affiliated enterprise, etc.); 5. off-balance sheet items (forward contracts, swaps, options, etc.). Often, explanations to financial statements provide more information about the true financial condition of an enterprise than the statements themselves. The financial statements of an enterprise provide information on the current financial position of the enterprise, as well as on the performance of the enterprise for the past period. Models used in financial planning are created on the basis of financial statements. The financial reporting of the enterprise allows you to outline the main targets.

9. Can financial statements be trusted? The information contained in the financial statements allows you to assess the profitability of the enterprise. If the level of profitability of the enterprise turns out to be lower than required, then a more complete analysis of the situation will reveal the causes of deviations. Therefore, the information should enable the recipient to respond in a timely manner to this information. Incorrect information is often worse than lack of information, as it can trigger actions that will only make the situation worse. How can you trust financial statements? It is assumed that the accounting in the company is carried out by honest, competent people who do not make mistakes in their work. This is not the case in real life. Accountants, like all people, make mistakes.

The use of technical means in calculations avoids arithmetic errors. But methodological errors (duplication or omission of records, registration of the fact of the economic life of the enterprise on the wrong accounts, etc.) are quite possible. The financial statements may be distorted due to the low technical skills of the persons preparing the report. If the accountant's earnings depend on the financial performance of the enterprise, then there may be a wrong desire to embellish the reporting. The balance sheet contains information about the financial condition and results of the enterprise at a certain point in time. The next day, the balance indicators will change. The management of the enterprise is interested in making the balance sheet as convincing as possible through a number of tricks.

In the last few weeks of the reporting period, the business has been trying to defer payments to suppliers. But already in the early days of the new fiscal year, funds will begin to wane, rewarding lenders for their patience. The accounting department always works "with a margin". In the accounting books, you can always find some costs that can reduce the profit indicator. You can write off a little more inventory, non-current assets, bad debts, or slightly overestimate reserves. Losing some part of the profit is always easier than increasing it. Financial reporting rules and regulations are not always clear and unambiguous. Some of the wording leaves room for "creative interpretation" when preparing financial statements. Financial accounting rules require all transactions to be recorded at historical cost. The balance sheet reflects assets and liabilities acquired or assumed by an enterprise at various times.

Therefore, the cost of acquiring assets shown in the balance sheet may not reflect the current economic value of these assets. Fluctuations in foreign exchange rates can also distort balance sheet data if an entity has assets and liabilities denominated in foreign currencies. From the foregoing, it follows that one should not rely entirely on financial statements in assessing an enterprise. This is only a fraction of the information available, albeit an important piece. Other sources of information include financial publications, local press, clients and competitors of the enterprise, and employees of the enterprise.

Expert Advice - Financial Consultant

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Financial statements are a set of accounting indicators, which are reflected in the form of tables characterizing the movement of property, liabilities, as well as the financial position of the company for the reporting period. Also, this report includes a schema of data on the financial situation of the organization, the results of its activities, as well as in its changes in financial position. A report is drawn up based on data taken from accounting. Just follow these simple step-by-step tips and you will be on the right track with your financial issues.

Quick step-by-step guide

So, let's look at the actions that need to be taken.

Step -1
Drafting financial reporting includes two main stages: preparation of materials and its subsequent preparation and presentation. In preparation for the preparation of financial report it is necessary to complete all existing accounting transactions that fall at the end of the reporting period, and also check all financial data that is necessary for reporting. Next, we move on to the next step of the recommendation.

Step -2
At the same time, when preparing the preparation of financial statements, calculate the taxes payable, take an inventory of the company's property and correct any errors found in the accounting in this period. Next, we move on to the next step of the recommendation.

Step -3
Prepare financial statements in accordance with the described requirements, as well as in accordance with various methodological departmental guidelines. The financial statements must be submitted on time to all interested bodies, the list of which is also determined by legislation, and this document must be signed and certified in accordance with all the requirements for paperwork that are applicable to financial statements. Next, we move on to the next step of the recommendation.

Step -4
The financial statements should include a variety of documents. First of all, the balance sheet. Indeed, this document reflects the financial position of the enterprise in the reporting period. Next, we move on to the next step of the recommendation.

Step -5
You can supplement the annual financial statements with an explanatory note. In it, explain the moments of filling in all forms of financial statements, give other required explanations, with the help of which these statements are made more objectively and more clearly. Next, we move on to the next step of the recommendation.

Financial Statements In accordance with IFRS 1 "Presentation of Financial Statements" a complete set of financial statements includes the following com

Step -6
In turn, you can use diagrams, graphs or tables in the explanatory note. In the text of the explanatory note, explain the principles of assessing all production inventories of the enterprise, give an analysis of their use, explore ways to fully use the company's potential, as well as improve the skills of employees. Next, we move on to the next step of the recommendation.

Step -7
Attach report profit and loss statement to financial statements. It describes in detail all the financial results of the firm for the reporting period. Next, we move on to the next step of the recommendation.

Step -8
Include in the reporting also the following reports: on the movement of the company's capital - this document will be able to show how the composition of the company's funds is changing; a statement of the flow of all cash, which will allow you to get an idea of \u200b\u200bthe expenditure of these funds of the company, their receipts and balances. Next, we move on to the next step of the recommendation.

Step -9
Reflect in the financial statements information about the borrowed funds of the enterprise, its debts and loans.
We hope that the answer to the question - How to make a financial report - contained useful information for you. Good luck to you! To find the answer to your question, use the form -

According to the law "On accounting N 113-XVI" of the Russian Federation, adopted in 2007, its head is obliged to organize the preparation of financial statements at the enterprise, which is an integral part of accounting. These requirements apply to all organizations and enterprises registered in the Russian territory.

The benefits of financial reporting

The state, not without reason, attaches great importance to this issue. Indeed, regular and continuous preparation of financial statements ensures timely and error-free calculation of taxes and their payment to the budget. This in turn contributes to the successful functioning of non-production structures. This means that the state itself is developing and gaining strength.

In addition, the systematic correct preparation of financial statements contributes to the systematic and successful development of the company's entrepreneurial activities, which, together with other enterprises, has a positive effect on the development of the country's economy as a whole.

Having the opportunity to monthly see the calculated, which includes the processing and systematization of the numerical data of all economic and financial transactions carried out during this period in monetary terms, the director of the company is able to correctly assess the financial condition of the company, as well as plan further actions to promote his business project.

What are financial statements?

Financial statements are a systematized set of monetary results that characterize the financial position of an enterprise for a certain period. It is drawn up using plan accounts in accounting tables, order journals or other registers and contains financial indicators on the movement of goods or products, property, securities, as well as various, including tax, obligations.

The usefulness of financial statements is determined by a set of specific indicators. The main elements of financial statements represent groups or sections of accounting, such as assets, equity, liabilities, expenses, income, losses and profits.

Enterprises;

Report on the targeted use of funds;

A report showing the movement of funds;

Balance sheet application;

Characterizing profit and loss.

It is also worth noting that small businesses, which are not responsible for conducting an audit of the statements, do not submit financial statements in Form No. 3 (statement of changes in equity), in Form No. 4 (statement of cash flows), in Form No. 5 (appendix to the balance sheet) and Of all the above forms, the main one is the statement of losses and profits, as well as the balance sheet.