Financial statements are formal records about the finances of a company. This is a written report that measures the company’s financial strength, performance, and liquidity. Also, the financial statements reflect the financial impact of business transactions. The main forms of financial statements include the form of income statements, changes in capital, balance sheets, and cash flow statements. Through the four forms of financial statements, it can be analyzed the progress of a company, whether the company is experiencing rapid development or bankruptcy.
In a company, financial statements are the most important thing. Unfortunately, many companies do not have their financial statements. Many factors cause companies not to have it. One of them is because they do not know clearly how to prepare financial statements correctly and easily. If you find it difficult to make a company’s financial statements, you can Chartered Accountants Beaumont Hills services called Boyd Associates.
To compile the financial statements, all you have to do is process the transaction journal and classify it into the general ledger of each group of assets, liabilities, and profit and loss accounts which consists of sales and all costs. Then how to compile good and correct financial statements? Follow the steps below.
The trial balance is the first step in keeping an adjusting journal and a worksheet. This report contains a list of ledger accounts with debit or credit balances prepared before the adjusting entry. A trial balance is made when all journals have been recorded in each account in the general ledger.
Adjusting journal entry
If there are still transactions that have not been recorded or are still not by the end of the period, you must collect the data needed to make an adjusting entry. This journal is made at the end of the period to adjust the estimated balances that will show the actual situation before the preparation of the financial statements.
By making a worksheet, you can more easily make a financial statement starting with a trial balance and adjusting the data obtained from the Adjustment Journal. The adjusted balance will be seen in the adjusted trial balance column and is the balance that will be in the balance sheet and income statement.
This report consists of income statements, statements of changes in capital, and other reports. This report can be prepared directly on the worksheet because it has separated the reported balance in the balance sheet or income statement. This report can then be reshaped so that it can produce a balance sheet and income statement that is easier to read and analyze.
After the accounts in the ledger have been adjusted, now is the time for you to make a Closing Journal close nominal / temporary accounts to the profit and loss account and move the profit and loss balance to the profit account not shared. After that, the information in the journal is posted to the ledger according to the account in question.
Balance Sheet After Closing
To check the balance of debits and credit balances that are still open, you must make a balance after closing that contains real accounts, not the nominal that has been closed.
After knowing how to prepare good financial statements, try to start making your company’s financial statements. By having financial statements, you can find out the company’s financial condition so that it makes it easier to make business decisions.