Financial statement preparation

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5/17/2022 3:22:36 PM

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How to prepare accounting financial statements

Introduction

An organization's financial statements provide a summary and classification of the financial information, assets and liabilities of an economic organization. The purpose of forming an organization is profitability, financing and investment activities. In this article, we prepare the business unit's income and expenses by preparing financial statements. Financial statements are defined as balance sheets, profit and loss statements, cash flow statements, comprehensive income statements for a period of time. In the following, each of the financial statements is explained separately and the required modules of each are specified. Accounting software accompanies managers and accountants by creating a suitable template in order to prepare the most accurate and fast financial statement in accordance with the accounting standard. In accounting software, the information required for financial statements is obtained from the registration information in different parts of the software and reduces possible errors to some extent and allows the preparation of financial statements between the period and the end of the period.

1- Balance sheet

Balance sheet that classifies the amount of debt, capital and assets of a company in financial periods as defined as the balance sheet or financial statement. Balance sheet as one of the financial statements shows the financial structure, the amount of liquidity of the organization and its flexibility.

1-1 Property

Assets are divided into current and long-term. This classification is based on the power of liquidity. For example, accounts receivable, securities, cash and banks (are inherently liquid) and .. are current assets. Long-term assets are those assets that include machinery, production, etc. that do not have the speed of liquidity but are productive. This type of asset is also called fixed assets, which include depreciation. (Except land, which is a fixed asset but has no depreciation.) In the balance sheet, assets are listed based on their liquidity.

1-2 debt

Debts, like assets, are divided into current and long-term debts. Debts are the company's liabilities to its creditors. Long-term debt is the same as loans and arrears, and current liabilities include accounts payable and income tax, and so on.

1-3 equity

Equity is basically the main interest of the owners and shareholders of the company from economic resources. That includes bringing in shareholders and creating debt.

2- Profit and loss statement

The result of the money that is earned or spent from the activities of an economic organization in a financial period shows the profit and loss statement modules. In this financial case, the income and expenses of a financial period should be determined and a report in which first the income and expenses are recorded and then deducted, and at the end, the profit or loss of the organization is determined.

2-1 Revenues

Revenues in this report include operating and non-operating revenues, which are called operating revenues, as a result of the company's activities. Non-operating income is not earned as a result of the company's activities, such as land purchased for the company and the after-sales income is non-operating income.

2-2 Costs

They are classified into operating and non-operating costs and the cost of goods for companies that have the product. Cost costs include costs that are used to produce the product, raw materials, production costs and overhead costs. Operating cost refers to all costs incurred in sales, marketing, administration and finance. Costs that are not in the form of cost and operating costs are called non-operating costs, which are not related to the company's activities and are not permanent.

Financial period expenses - Financial period income = special profit

In preparing the profit and loss of a company, it is necessary to bring operating income and then operating expenses, and the result of its difference is deducted from the difference between non-operating income and operating expenses, which is profit before tax and deducted from tax. This amount of special profit and loss is obtained.

3- Cash flow statement

The cash flow statement is a complete reflection of the money exchange activities between the company and other organizations. The financial statement, which is referred to as the cash flow statement, fully shows the reasons for the failure of a company's financial obligations and an overview of where and how capital enters the organization and in what areas it is spent. Displays.

In order to prepare a cash flow statement, it is necessary to differentiate the money spent from the money received in terms of investment and operational activities.

4- Comprehensive profit and loss statement

The comprehensive income statement is an increase or decrease in the accumulated profit result ing from the company's activities. In other words, the comprehensive income statement All income and expenses are recognized in a financial period that can be presented to the owners of capital and to Includes the separation of their constituent elements. In some cases where revenues and expenses are not reflected, they should be credited to the accounts of the owners of the capital according to the accounting standard. In order to use and make accurate decisions of shareholders according to the financial statements, it is necessary to identify all profit and loss statements of the organization, one of which is called comprehensive profit and loss. In the case of comprehensive income, the amount of increase or decrease in equity is reflected in terms of income and expenses. In principle, the profit and loss statement for the period is one of the modules of the comprehensive income statement. and the rest of its modules are listed separately.

Financial Statement Analysis

Fundamental analysis of financial statements is very important. All shareholders of the organization need reports on the profitability of the organization. These reports are valuable when evaluated together. One of the most important evaluations is the relative evaluation that determines the ratio of profit, cost, production, etc., the ratio of past years and financial periods, and also the ratio of performance to competing companies or similar industries. Although the use of ratios alone is not an evaluation module for decision making, it is by nature an important complement to providing appropriate solutions for the organization.

In addition to balance sheets and profit and loss information, financial statements include appendices that include the company's policy, depreciation calculation method, leased assets, etc., and the biggest limit ation that these statements create for organizations is being ignored. It is the rate of inflation and is based on historical cost, so explanatory notes are the exception to the lineup of these statements. Financial statements generally contain widely used and important information that observes the status of debts and assets of the company and the proportion of income and expenses of the organization, is determined. However, the main purpose of receiving such financial statements is to predict the future status of the company and the decision to invest and increase credit or in some cases to find the cause of the company's unprofitability.

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