Perhaps what you haven't realized yet is that understanding a bit of accounting and financial reporting can be very fulfilling. If you are eager, you will see the power coupled with knowing how number flow in your business. Don't worry , everything will come out right in the end because creating a financial statement is so rational and beautiful.
Here are simple steps for you to create a financial statement:
Step 1: Watch out where the money flows.
The sole purpose of a financial statement is to show you the money. It shows you where the organization's money came from and where it was spent. List your required expenses. And to see clearly the path your money has taken, you should also list non-essential expenses like social outings, subscriptions or cleaning services.
Step 2: Create a series of Excel spreadsheets.Start making columns for the financial report. This includes a column that points each type of financial component. A vital financial report includes a section for assets and one for liabilities. In some cases, these two columns can be broken down into more detail. For example, assets can be divided into sub columns to show property, miscellaneous holdings and outstanding receivables.
Step 3: Keep a separate expense category in an annual statement for Income Tax Payable and other dues.
If there are any bizarre occurrences or unexpected expenses in the period you are documenting, add categories for "extraordinary gains" or losses, for events and dealings that are unpredicted or rare, such as repair from a natural disaster. If there is an expense that has no category, there should still be room on the bottom to add one.
Step 5: Place the total amount of sales in the appropriate space on the spreadsheet.
Most managers choose to exclude cash sales from accounts that pay monthly.
Step 6: Deduct the expenses from the total amount of cash sales and monthly receipts.
You do this to identify your profit. At the end of the year, an annual financial report is now easy to create, based on the monthly financial report. This profit and loss statement will assist you in obtaining financing.
Step 7: Collect the financial records together.
This will contain all information about existing liabilities that were not remunerated throughout the period and any receivables that were not received as of the cut-off date for the report. All known assets, including property and other holdings, also should be compiled into a simple listing.
These steps should deal successively with the elements that enter into your spreadsheet. Much of these may appear elementary and indeed analysis of financial statements is a simple matter. But you have to be careful along the way because there might be still pitfalls that you need to recognize and guard against.
