Afinancial statement is a document that presents the financial position of a company at the end of a specific fiscal year. It is one of the most important elements of financial reporting, because it allows you to understand what financial condition the company is in. Read more about it.
What is a financial statement? Definition of the term
A financial statement is a document that contains information about the financial position of a company for a given fiscal year. It contains information about income, expenses, profit or loss, as well as the assets and liabilities of the company. The financial statements consist of several elements, such as the balance sheet, income statement, cash flow information and the statement of operations.
What does the financial statement cover?
The financial statement covers all the activities of the company, that is, both operating and investing and financial activities. It contains information about income and expenses, as well as the company’s assets and liabilities. Thanks to the financial statement, we can see how much the company earned in a given year, what its costs were, and how much profit or loss it made. The financial statement also allows us to understand what the funds were used for and what the company’s liabilities and receivables are.
How to prepare financial statements well?
In order to prepare a financial statement well, the first thing to do is to ensure that the information contained in the document is reliable and accurate. It is also important that the report be readable and understandable to audiences such as investors, shareholders or banks. To prepare a financial report, you should:
- Gather all necessary documents and data, such as invoices, bills, accounting documents, etc.
- Prepare a balance sheet, which is a presentation of the company’s assets and liabilities as of the closing date of the fiscal year.
- Prepare a profit and loss statement, which shows how much the company earned or lost during the year.
- Prepare a statement of operations, which shows the financial position of the enterprise and its operations for the year.
- Prepare a cash flow statement, which shows where the company’s funds come from and where they go.
Financial statements – what to pay attention to?
- When preparing a financial statement, it is worth paying attention to several important elements, such as:
- Reliability and accuracy of the information contained in the report.
- Readability and comprehensibility of the document for the recipients.
- Correctness of entries and calculations.
- Compliance of the report with applicable laws and accounting standards.
- Comparison of results with previous years, which will allow you to see what are the trends in the development of the company.
In conclusion, the financial statement is an important document that presents the financial situation of the enterprise. Its good preparation requires reliability and accuracy, as well as attention to important details such as readability and comprehensibility for the audience, correctness of entries and calculations, and compliance with applicable laws and accounting standards.
