Financial reports play a vital role in every business. Why? It is because it unfolds all the financial activities of a company. But not all of us know how to make it. It is not a secret that making such financial statements is tricky and challenging. Luckily, we have shared our downloadable sample financial report templates that can guide you. They’re easy to use and customize. To discover more about this topic, read this entire article.
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What Is a Financial Report?
A financial report, also known as financial statements, is a document that summarizes crucial financial accounting information of a company or business. There are three types of financial reports: the cash flow statement, balance sheet, and income statement. The purpose of financial reports is to monitor, analyze, and report a company’s business income. It analyses the resource usage, cash flow, market results, and the company’s financial health. It enables you and your investors to make wise decisions on how to run the company.
How to Prepare a Financial Report?
Every business must have financial statements or reports. Without such, you won’t be able to do things like planing your company’s expenses, secure loans, or else sell your business or products. But the question is, how to prepare such financial reports? Preparing such financial statements is not easy. But you can make it easier by following these steps below:
1. Identify the Reporting Date and Period
The first thing that you must do is to identify when will be the reporting date and period. A financial statement is designed to reflect a company’s net assets, liabilities, and shareholders’ shares on a given date, usually referred to as the reporting date. The last day of the reporting cycle will also be the reporting day.
2. Determine Your Assets
Once done with the reporting date, you must determine and tally your assets. A financial report would usually list assets in two ways. They are individual line elements and total assets. Splitting assets into different line items will make it easier for analysts to determine all the assets and where they come from.
3. Determine Your Liabilities
Aside from determining your assets, you also have to identify your liabilities. Like your assets, it should be listed in two ways: the current liabilities and non-current liabilities. Current liabilities may include accounts payable, accrued expenses, deferred revenue, and other current liabilities that you may have. On the other hand, non-current liabilities are long-term lease obligations, long-term debt, and other non-current liabilities that you may have.
4. Calculate and Estimate Stakeholder’s Equity
After that, you must calculate and estimate the stakeholder’s equity. When a company or enterprise is owned by one person, you can easily calculate and estimate the stakeholder’s equity. Thus, if the corporation were publicly owned, it will be more difficult for you.
5. Add the Total Liabilities and Equity and Compare to the Assets
After doing such calculations, you need to balance everything. It would be essential to compare net assets against total liabilities plus equity to ensure that your financial statement is balanced. You would need to put liabilities and shareholders’ equity together to achieve this.
Why are financial reports important?
Financial reports are important because it helps a company to analyze and examine all of their financial activities. It can also give both internal and external stakeholders an accurate and comprehensive view of the metrics they need to make big decisions and actions.
What is financial reporting?
Financial reporting is the process of producing statements that uncover the company’s financial status and health.
What are the characteristics of quality financial reporting?
The common characteristics of financial reporting are:
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Financial reports are inevitably useful in every company, be it big or small. Thus, making such is very much challenging. Use our downloadable financial report templates. They can help and guide you. Download it now to get started!
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