How to Prepare Financial Reports – A financial report is a detailed report about the financial condition of a company during a certain period, usually this report is reported every quarter either quarter 1 to 4 or per year. This report contains important data such as balance sheets, profit and loss statements, and cash flow statements to see how the company’s financial condition is such as money coming in and out of the company. This report also provides a deeper understanding of the company’s financial health and helps business people to make business decisions and strategic planning.

Let’s review how to prepare financial reports.

Types of Financial Statements

1. Financial Position Statement (Balance Sheet)

The Financial Position Statement (Balance Sheet) presents information about the financial position of an entity on a certain date, which includes assets, liabilities, and equity.

2. Income Statement

The Income Statement presents a financial document that records the company’s revenues, expenses, profits, and losses in a certain period, such as monthly, quarterly, or annually.

3. Statement of Changes in Equity

Statement of Changes in Equity Presents changes in owner’s equity during a certain period, reflecting retained earnings, dividends, and other transactions.

4. Statement of Cash Flows

Statement of Cash Flows Presents the company’s cash inflows and outflows during a certain period, which are divided into operating, investing, and financing cash flows.

5. Notes to the Financial Statements (CALK)

Notes to the Financial Statements (CALK) Present additional information that is relevant to understanding the financial statements, such as explanations of accounting policies, information about important events, and others.

Steps for Preparing Financial Reports

1. Recording Transactions

The first step is to record financial transactions. The process of recording every financial activity that occurs in a company. This recording includes all transactions, both income / sales / revenue, etc. and expenses / purchases / operational costs, etc. Proof of transactions is also very important, the most important thing in accounting so that proof of transactions must not be lost.

2. Posting to the General Ledger

Posting to the general ledger is the process of transferring transaction data from the general journal to the ledger, which is a record that contains all of a company’s financial accounts. This process is important because the general ledger groups transactions by account (such as assets, liabilities, and equity), while the general journal records transactions chronologically. By posting to the general ledger, financial data becomes more structured and easier to use to create financial reports.

3. Making a Trial Balance

A report containing all types of account names along with the total balance of each account that is systematically arranged according to the account code sourced from the company’s general ledger for a certain period. The list of accounts in the general ledger is grouped into liability groups or asset groups.

4. Adjusting Journal

Adjustment journal is a journal made at the end of the accounting period to adjust account balances to reflect actual conditions. This journal is used to record transactions or events that have not been recorded in the general journal, so that account balances are more accurate. Adjustment journals also play a role in measuring company performance.

5. Worksheet

A worksheet that presents/contains special columns to collect and organize accounting data systematically. This helps facilitate the preparation of financial reports and checks the conformity of account balances before the final financial report is made. The adjusted balance will be seen in the adjusted trial balance column and are the balances that will be reported in the balance sheet and income statement.

6. Making Financial Reports

Preparation of Financial Reports, the process of compiling a company’s financial records that cover various aspects such as assets, liabilities, equity, income, and expenses in a certain period. This financial report is a formal document that contains information about the financial position, performance, and changes in the financial condition of a company. The information presented in the financial report reflects the company’s performance and can be used for decision making.

7. Closing Journal

A journal created at the end of an accounting period to close temporary accounts (nominal accounts) and transfer their balances to capital accounts. The main purpose is to empty the balances of temporary accounts (such as income, expenses, and prive) so as not to interfere with transactions in the next period and ensure an accurate capital balance on the balance sheet. To make it, a document is needed that is used as a basis for compiling a closing journal such as a report of nominal/temporary accounts to the profit and loss account and transferring the profit and loss balance to the undistributed profit account.

8. Post-Closing Trial Balance

A financial statement prepared after all closing entries have been completed at the end of an accounting period. This statement contains the balances of the real accounts (assets, liabilities, and equity) after the temporary accounts (revenues, expenses, and personal) have been closed.

Conclusion

By having financial report preparation, you can find out the financial condition of your company, making it easier to make a decision.

Following the steps listed above is a quick and easy way to start preparing effective and correct financial reports.

Let’s start making your company’s financial reports.

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