A Financial Statement is designed to portray a clear picture of the financial health of the company. The financial reports are prepared on monthly, quarterly and annual basis. The financial reports are of different types, including income statement, balance sheet and cash flow statement. It is a professional way to report your income sources and total income spent. It is an appropriate way to maintain the accurate record to file income tax returns. The financial reports are reviewed and analyzed by the investors, financial analysts, board of directors and government agencies.
Tips to Design Financial Statements
In the first step, you have to decide the total time period to be covered in the financial reports. The financial reports are designed after four months, six months or 12 months. It may depend on the laws and needs of the company.
It is important to prepare a journal ledger to record every transaction with proper date. This will help you to adjust the financial statements. It is an easy way to effectively show the assets and liabilities on the both sides of the company.
Prepare Balance Sheet
The left side of the balance sheet contains assets, cash in hand, cash at bank and accounts receivable. The right side of the balance sheet will contain liabilities, including accounts payables, mortgages and other loan payments.
The equity will be written on the liabilities side of the balance sheet. The equity is also labeled as capital or net worth of the business. The amount of money the company has left after paying off all liabilities is known as capital of the company. After completing your balance sheet, sum up the totals of both assets and liabilities. The balance of assets should be equal to the liabilities and equity.
Prepare the Income Statement
The income statement is one of the most important financial statements, because it helps you to have control over the costs and expenses that are directly related to the income. In this statement, you have to add up total sales or gross revenue and subtract the returns as well allowances on the sales. You will get the amount of net revenue.
All operating expenses and costs will be recorded in the statement that is important to do the business. You have to subtract these costs from the net revenue to get the gross profit. The general and administrative expenses, including rent, utilities, depreciation, dues and salaries should be listed in a separate section. The wear and tear of the building, machinery and equipment is known as deprecation. The total amount will give you net profit.
Prepare Cash Flow Statement
The cash flow statement is an important document to track the ins and outs of the cash from the accounts of the company. The statement proves really helpful to prepare balance sheet and income statement.
Write operating activities of the company, because it will prove helpful to reconcile the net income with the total amount of cash the company needed for the operating activities. Maintain a complete record of investment activities to show the income from sales and profits from the investment portfolios of the company.
Write about all financial activities and financial instruments as well as footnotes to detail the summery of the accounting practices and procedures.
Here is preview of a Free Printable Financial Statement Template created using MS Word 2013,