As a business owner, it is important to prepare financial statements to help make budget decisions and plan for your business’ future. At Leskun & Son Accounting, we provide bookkeeping services to businesses throughout Abbotsford, Langley, and Mission that help to ensure that our clients are able to comprehensively prepare financial statements.
What is Included in Financial Statements?
Financial statements are comprised of the following four elements:
- An income statement
- A statement of changes in shareholder equity
- A balance sheet
- A cash flow statement
These separate statements can be prepared most easily by using spreadsheets or accounting software and each one offers a look into how a business has spent money to predict future cash flows and financial necessities.
How to Prepare Financial Statements
By following the proper steps and tips, preparing financial statements can be simplified greatly. The steps to compile financial statements are as follows:
1. Get Your Records Organized
Before beginning any actual paperwork, get all of your financial records organized by month and type of document. These records will include expense receipts, bank statements, and credit card statements.
2. Prepare Your Income Statement
An income statement will report your company’s revenues and expenses. To prepare this financial statement, you will need to tally up the expenses of the business and subtract them from the total income of your operation. Expenses can include the costs of goods, administrative costs, and expenses related to customer outreach.
3. Prepare a Statement of Changes in Shareholder Equity
The statement of changes in shareholder equity shows changes in a company’s ownership. If one owner or shareholder buys out another for a larger stake in a company, this report will reflect that action. This financial statement not only shows who finances a company but also whether the company is financed by capital, earnings, or debt.
4. Prepare a Balance Sheet
Balance sheets state what a company’s assets are and who owns those assets. In order to prepare this financial statement, it is necessary to know which assets are financed through debt and which assets are owned. The balance sheet will state the dollar amount of assets owned by the company and specify how much of that amount is owned through liability and how much is the owner’s equity. This financial statement will change based on the payment of debts and acquisition of assets, meaning that it is only accurate to the date that it was created.
5. Prepare a Cash Flow Statement
Cash flow statements report any money that goes in or out of a company. They differentiate between cash inflow from sales or revenue and money that came from a loan. This type of financial statement also offers insight into the types and timing of expenditures, which is useful for predicting future business expenditure.
If you would like to learn more about how to prepare financial statements or if you are interested in one of our services, please contact Leskun & Son Accounting at 1-877-826-1219 or fill out a contact form on our website.