To get a perfect financial report, it requires the implementer to go through many calibration steps, spend a lot of time and effort.
Financial statements are a very important tool, helping investors have a more objective view of the business's operations to make the right investment strategy. In particular, every year enterprises must make financial statements to submit to competent authorities. So, what does a financial statement consist of? What are the steps to create perfect financial statements? Let's find out with Navigos Search now!
1. Purpose and meaning of financial statements
A financial statement is an accounting report that shows the general financial accounting information and cash flow of a business. Thereby, users, objects outside the business and especially investors will make appropriate economic decisions.
Financial statements must fully provide the following information of an enterprise: Assets; liabilities must pay; equity; revenue, other income, production and business expenses and other expenses; profit, loss and distribution of business results; cash flows.
What is financial statement?
Financial statements have an important meaning in the management of enterprises and governing bodies and interested subjects. As follows:
- As a basis for research, analysis, and potential discovery
- As a basis for investors, owners and creditors of enterprises to make decisions on management of production, business and investment activities.
- It is the basis for building economic - technical and financial plans of enterprises.
- Present and reflect in general on the situation of assets, finance, liabilities, sources of asset formation and business results during the period of the enterprise.
- Help managers propose measures to increase the efficiency of capital use, improve production and business efficiency, and increase profits for the organization.
- Assist in checking and monitoring the use and ability to mobilize capital for production and business activities of enterprises.
Therefore, financial statements are always the concern of investors, lenders, the board of directors and all officers and employees in the enterprise.
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2. Common types of financial statements in enterprises
Depending on the intended use of financial statements, they can be divided into four main categories:
- Business results report: Show the income, revenue, expenses of the enterprise and clearly show the financial activities of the unit in specific periods such as month, quarter, year. The income statement is independent, showing: "Profit = Revenue + income - expenses". If expenses are less than revenue and income, the business will earn a profit.
- Cash Flow Statement: Shows how the business has generated and used cash flow in a given period. In a more understandable way, the cash flow statement clearly shows the cash flow in - out in a period with 3 main activities: cash flow from operating activities, investment and finance.
- Change in Equity Statement : Shows the change in equity increase or decrease during a given period in the most concise, specific way.
- Balance sheet: Consists of assets (the entire value of existing assets in all business periods to the end of the accounting period) and capital (the source of enterprise assets at the end of the accounting period). maths).
3. Steps to create the perfect financial statement template
Financial statements are prepared using excel or accounting software. Whichever tool you use, you need to go through many different steps. Check out the following suggestions for the perfect financial statement:
Accounting vouchers are documents that reflect economic and financial operations such as output invoices, input invoices, treasury books, time sheets, payrolls, inventory receipts and exits, property records, etc. The day-to-day activities of the enterprise are expressed through arising economic and financial transactions. Therefore, to reflect the business situation, you must first collect and synthesize all kinds of accounting vouchers and arrange them scientifically, check their reasonableness and legitimacy.
Note, you should arrange the vouchers in chronological order, clip the original voucher with the accounting voucher,... for convenience in the next step.
Accounting vouchers need to be scientifically arranged and carefully checked
Step 2: Accounting for economic transactions
When you have fully collected and organized the vouchers, you need to record and reflect them in the accounting books. With fixed assets and prepaid expenses, you need to account for the allocation of expenses incurred each month with a reasonable distribution time in accordance with regulations.
You can use the available accounting software to make your accounting clearer and easier. At the same time, accounting software has the function of searching, correcting and deleting quickly and accurately, so it is convenient for you to control and minimize errors.
Step 3: Allocation, depreciation and prepaid expenses
You should create an Excel table to keep track of depreciation and prepaid expense allocations. Every month, you will perform automatic distribution. You should compare and compare the distribution results on the software, Excel tables, especially the expenses incurred in the middle of the month. At some businesses, to serve budget management requirements, you will need to use Excel tools to distribute items such as salary, social insurance, health insurance, other expenses, ...
Step 4: Record estimates and adjustments
At the end of the year, you have to review to adjust and add additional accounting to the accounting software. Include:
- Entry to evaluate the difference of the exchange rate at the end of the period
- Bad receivables, provision for devaluation of inventory,...
- The year's expenses need to be paid first: 13th month salary, Tet bonus, audit costs, house rent, electricity, water, materials, etc.
- The journal entry classifies investments, short-term liabilities, long-term liabilities, short-term and long-term loans, etc.
- Correction entries for errors and omissions (if any)
Step 5: Compare the data in the books
In the process of making financial statements, the inspection stage is extremely necessary. If the wrong accounting data will lead to inaccurate financial statements, you must review, find the cause, then adjust and start over. This takes a lot of time and effort.
Step 6: Perform the carryover entries
After carefully reviewing and fully supplementing the missing entries, you proceed to transfer profit and loss for the year. Note that last year's profit and loss must be carried forward before carrying out this year's profit and loss transfer.
For businesses that incur income tax, you need to make the first transfer to determine the profit, calculate the payable tax amount, record the tax recognition entries, and the incurred tax expenses. Then, perform the conversion to get the exact final profit figure.
Step 7: Prepare Financial Statements
When all economic transactions have been fully and accurately reflected, you can submit financial statements according to the instructions specified in Circular 133/2016/TT-BTC, Circular 200/2014/TT -BTC:
- Circular 133/2016/TT-BTC: Applicable to small and medium sized enterprises
- Circular 200/2014/TT-BTC: Applicable to enterprises of all fields, types and economic sectors, of all sizes.
Steps to Perfect Financial Statements
Above is all the knowledge and experience that Navigos Search has collected. Hopefully, these shares will be useful for businesses in the upcoming financial reporting period.
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