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How to write a financial statement' brief overview

How to write a financial statement. Learn how to create and present a formal full-fledged record of the financial activities of an entity or firm

How to write a financial statement: writing the statement of cash flows

Financial statements represent a formal record of the financial activity of a company. At the end of each accounting period, security regulators in many countries require companies to submit at least four financial statements, namely: a trading report, balance sheet of profit and loss, income statement, cash flow statement and a paper that demonstrates the stockholders' equity. Knowing one's way around such essential thing as a financial statement is an important step – and an unavoidable one too – in maturing as a competent leader or business owner. Therefore, a financial statement is an official statement showing the financial status of a company for a certain period of time. Learning how to write a financial statement is a matter of collecting accounting data and following a few simple steps, namely:

  • 1. First of all, you need to check all the accounting documents that cover financial operations planned or already accomplished by the date of the preparation of the financial statements. The journal of general entries and ledger should be updated, and the adjustment of the entries must be recorded in order to account things like depreciation, provisions and deferrals. As long as financial statements will be prepared for a certain period of time it is crucial to verify that the general ledger has been updated through the date. Review all the documents carefully to avoid further publishing errors.
  • 2. Prepare an appropriate title for the balance sheet. A balance sheet shows a snapshot of a company's financial status as it is by a certain date. The title, which should be placed at the top of the page and centered, needs to include three points: the name of a company, the words Balance or Statement Of Financial Position and the exact date to which the balance statements actually refers. The date must be written in the following format: month, day and year.
  • 3. Write down the names of the company's accounts in the balance sheet. A balance sheet shows the balances of all accounts of the company, whether simplified or expanded. On the left side of the page, record the names of all active accounts, which can be classified as ones belonging to at least one of the following groups: current assets, plants, property and equipment, investments and intangible assets. On the right side of the page, record the names of all liability accounts. Rate the equivalence of the accounts in order to manage all accounts under certain liabilities.
  • 4. Write down the balance of each account. To the right of each account name, fill out in the balance sheet data column the necessary account balance information. Provide subtotals for each classification, and provide total amounts of assets, liabilities and owner's equity. Make sure that the balance of total assets equals the sum of the liability account and equity balances.
  • 5. Now you should proceed to an income statement. Think of an appropriate title for the income statement. An income statement usually reflects the profitability of a company. The accomplished article requires three pieces of information: the name of a company, the words Income Statement and the specification of a period that the statement of income covers (for example, From the beginning of the year till March 15, 2017).
  • 6. Record the names of the company's accounts in the income statement. The account income data column requires the following, in descending order: sales, the cost of sales, operating expenses and other expenses or incomes. These accounts can be described in more detail as well as split in a more convenient way.
  • 7. Now you can record the balance of each account. Again, fill out in the form the account balance to the right of each account name, matching the period that the income statement reflects. Once all expenses and income have been summarized together, the final outcome must be recorded as net income (NI).

How to write a financial statement and lay out your statement of cash flows

Remember that a financial report should not be too complicated to read. Simple and concise figures related to all applicable components is all you need. Provide all available supporting documentation if there is a need to get more detail on a budget in the report. The purpose of a financial report is to reflect a real current financial condition of the company. In order to make sure readers are not confused always clearly indicate the financial statement period. You should be ready to prepare a detailed listing of all general and administrative expenses, including depreciation and amortization expense, utilities, officer compensation, office salaries, rent, bad debt expense, dues and subscriptions, auto expense, telephone and office expense. Be sure to label correctly each item in the balance sheet. Subtract all general and administrative expenses from gross profit to arrive at net profit. Trying to smooth the results to make the company look more profitable could lead to serious problems in future, so keep the record straight and avoid subjective estimates.

    Now you want to prepare statements of the earnings and cash flows, therefore, proceed to the following:

  • 8. Prepare an appropriate title for the statement of retained earnings. The whole thing needs three pieces of information: the name of a company, the words Statement Of Retained Earnings and the specification of the period that your earnings statement covers. This time period should be identical with the period presented in the income statement – and this is a major point regarding how to write a financial statement.
  • 9. Record all the account names for the statement of retained earnings. There are only four items that appear in a state of stockholders' equity. In descending order, they are as follows: the open balance of retained earnings, net income, the dividends paid and the final balance of retained earnings.
  • 10. Write down the balance of each account. Fill in the form with the account balance and specify the period which the earnings statement reflects the right of each account name. By adding and subtracting the net income dividends paid from the open balance of retained earnings, you get the desired new balance of retained earnings.
  • 11. Finally, you should prepare an appropriate title for the cash flow statement. The cash flow statement keeps records of cash disbursements and receipts, so again you will need three pieces of information: the name of a company, the words Cash Flow Statement and the period of time that the statement reflects.
  • 12. Record the titles of all the sections and account names to the statement. There are, mainly, three titles of the required sections: a) the first title is Operating Activity Cash Flows - this section is used to reconcile the income of the accrual to cash accounting; b) the second title is Investing Activity Cash Flows – and this section keeps the records of the purchases and sales of long-term investments; c) ultimately, the third title is Financing Activity Cash Flows - in this section we would like to see information about shares and bonds of the company, and the data reflecting payments of dividends as well.
  • 13. Now you need to summarize and record the balance of each account. For the last time, fill in the form with the account balance data and put the period that the cash flow statement reflects the right of each account name. Once all cash transactions have been added up, you get to the net cash flow for that particular period (which can be either positive or negative). 

How to write a financial statement. Learn how to create and present a formal full-fledged record of the financial activities of an entity or firm

How to write a financial statement: writing the statement of cash flows

Financial statements represent a formal record of the financial activity of a company.

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Assignment ID
100000095
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CREATED ON
June 19, 2016
COMPLETED ON
June 20, 2016
Price
$24
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