“Help me prepare financial statements” is a common phrase in accounts departments and learning institutions that offer business-related certificates. Galaxygrades.com is an academic writing website that will sort out all your assignment needs to help answer your query, “help me prepare financial statements,” hence the reason why you should check them out.
Financial statements are important to any entity and are used globally to convey the entity’s financial position. They are not the easiest to process, but here’s a walkthrough on how to go about it.
How do you prepare financial statements?
Financial statements are official written records that show a business entity’s financial activities. Financial statements show the financial performance and events of the entity to ascertain its performance, and preparing financial statements should make the end product easy to understand. Still asking, “Help me prepare financial statements?”
Accountants, financial analysts, creditors and investors can use the statements to monitor and assess a company’s performance and earning potential and predict if it will be profitable in future. Here are the four types of financial statements to get a general overview of what preparing financial statements entail. You won’t be after reading this.
1. Balance sheet
It is also known as the Statement of Financial Position, and it helps to calculate the financial position of a business entity at a given report date. It is made up of three elements:
· Assets: These are the things that an entity owns that are of value. Assets can be sold or used by a business entity to provide services or make monetary value products. Examples of assets are equipment, inventory or vehicles.
· Liabilities: These are things that one entity owes another entity. They can comprise all sorts of obligations like bank loans, materials or services supplied on credit, rent, taxes and environmental cleanup costs.
· Equity: It is also known as net worth or capital. Equity is what an entity owes its owners. It is what remains after a business sells its assets pays off its outstanding liabilities. The money that is left over belongs to the owners of the business entity.
A balance sheet is an essential part of a financial statement. It is used to calculate an entity’s assets, liabilities and equity towards the close of the financial reporting period.
2. Income statement
The income statement is also called the Profit and Loss Statement, and it shows a business entity’s net profit or loss during a given financial period. It also shows the expenses incurred during operations that led to the revenue earned. An income statement is a good indicator of what the entity gained or lost during the financial period. It can also contain the depreciation charge on the fixed assets page.
In case the company is publicly held, the earnings per share figure is also reported. Preparation of the earnings reports per share calculation in the income statement shows the amount of money shareholders will get if the net earnings for the financial period were distributed. However, most shareholders prefer to reinvest the retained earnings. Go to Galaxygrades.com to get in-depth assistance on how to prepare this statement.
The image below is an example of a diagram that depicts what the income statement encompasses.
3. Cash flow statement
The statement shows the in and out movement of cash within an organization over a financial period. The statement of cash flows is broken down into the following classifications:
· Operating activities: It shows cash flows derived from net income or loss. This part of the report reconciles net income to the cash used in an entity’s operations or received by it. To reconcile, the statement adjusts the net income derived from non-cash items and changes for the cash used by the rest of the assets and liabilities.
· Investing activities: It shows cash flows derived from buying and selling long-term assets that are different from inventory. Examples of such assets are equipment, property or investment securities. If a business entity does a property search and buys the property, the statement captures the purchase as an outflow of cash from investments. These assets could either undergo appreciation or depreciation.
· Financing activities: This shows cash flows acquired by selling stocks and bonds or borrowing bank loans. Repaying the bank loan is also recorded as revenue use.
4. Statement of changes in equity
It’s also called the Statement of Retained Earnings, and it shows the movement of equity over a reporting period. Whenever preparation of financial statements occurs and they are circulated internally, the statement of retained earnings is not included because the management team does not necessarily find the information useful. This statement can be prepared to perfection by the folks at Galaxygrades.com so you don’t have to keep saying, “help me prepare financial statements. It has the following components:
· Share capital paid or issued
· Dividend payments
· Net profit or loss reported for the financial period that appears in the income statement
· The changes that occur when correcting an accounting error or policy changes
· Gains or losses in equity
Owners of small businesses often fear financial statements, but all it entails is the preparation of statements and entering trial balance amounts to well-formatted statements. The statement of retained earnings is prepared if a business owner needs to approach a financier for some much-needed backing or just for a business owner to have insights into the retained earnings received.
Preparation of the adjusting entries should be done in the general journal, and the general journal totals posted to the general ledger. After posting to the general ledger, you can prepare the financial statements. Good software eases the pains of posting to the general ledger and makes all this preparation easier. It also eases issuing corrective documents like a credit note or debit note to add or subtract the invoice value automatically.
A trial balance should be done and the adjusting entries should be prepared to allow preparing of the financial statements. Preparing these statements is as easy as adding the amounts on the trial balance onto well-formatted statements. An example of a diagrammatic representation is as below:
How do you prepare financial statements from a trial balance?
A trial balance is a crucial bookkeeping document used in the preparation of financial statements. In this document, all ledgers’ ending balances are recorded into a debit and credit column, and the balances on both columns should be equal. A trial balance is generally used to keep the entries in an accounting system mathematically correct.
When you prepare financial statements, if total debits in a trial balance are the same as the total credits, then the trial balance is balanced; hence the ledgers are error-free. Galaxygrades.com provides excellent examples of balanced trial balances. So, no more saying, “help me prepare financial statements.”
Once a financial period has ended, expenses, assets, or losses should appear in the debit column. Equity, liability or revenue accounts should appear in the credit column. The debit balances are in the left column, while the credit balances are in the right column of the page. The assets in the debit column may either undergo appreciation or depreciation over the period.
After adjusting the trial balance, you can prepare the financial statements by deriving account information from the trial balance. This information helps the accountant prepare each of the statements mentioned above, and the income statement is the first to prepare and include expense and revenue accounts.
The financial statement of earnings should have the net income received, beginning retained earnings and dividends. The balance sheet contains contra assets, stockholder equity accounts and assets that have been through appreciation or depreciation.
Who uses financial statements?
Accountants use these statements to provide information to different users. The different groups of users search for and utilize the information for related or other reasons. These people definitely use the phrase, “help me prepare financial statements.” Here are the users below:
· Owners and potential owners
The owners provide funds for the organization; hence they need to understand whether their investment is being used appropriately and get a feel of the profitability and revenue. Financial statements help them make operational decisions that help to grow the entity and ensure funds are appropriately distributed.
They would also like to know if the company is adhering to tax laws to prevent potential issues with the respective tax collecting authority. The owners always watch their return on investment to assess a course of action in future, such as expansion. They may also want to know the type of tax deductions they can benefit from by buying assets that undergo depreciation over time.
Prospective owners would want to know how the company is progressing and find out about its prosperity before injecting their considerable investment into it. Financial statements help them safeguard their investment and put their minds at ease.
Creditors use financial statements to determine if they can grant a loan to the business. The statements show the financial soundness of the entity. They can determine the gross profit and loss incurred and know whether they have enough security to use for lending. Lending institutions also use this data to search for defaulted loans during the credit application review.
Employees use financial statements to help them be more aware of the operations of the company. They also help them assess whether the entity can sustain an income increment or bonuses for the employees and determine how they will disburse the cash coming inadequately for the daily operations.
They would also like to know if the tax deducted from their salaries is remitted and borrow a page out of the owner’s book by confirming the gross profits and losses that the entity might make.
Governments like to scrutinize the financial statements of profitable companies to know their earnings and determine if they remit their tax and whether the correct amounts are remitted, and deductions are brought in line with agreeable standards. Tax evasion causes the government to lose billions each year, so they try hard to curb the vice.
Customers would like to know an entity’s ability to operate, have valid accounts practices and maintain stability. They should be enlightened on proper operational practices that lead to the low cost of production, which ultimately leads to low prices that a consumer bears.
· Stock exchange
Financial statements illuminate an entity’s financial affairs to help keep them in line. The stock exchange uses these statements to protect investors and their interests to ensure no one can subtract from their net worth. Professional bodies like accountant associations, financial institutions, employers’ associations etc rely on these statements for their concerns.
· The general public
These statements provide information as to whether an entity is providing enough gainful employment. They also help analysts, researchers and other outside interested parties with the preparation of relevant reports that will be distributed to the concerned parties.
Accounting help questions
What is an accounting cycle?
An accounting cycle is a process used to capture an entity’s financial events by analyzing and recording the data. It ensures that money that is exchanged during a financial period is documented in the financial statements and fully accounted for.
The accounting cycle acts as a checklist to be done when the period ends. There are specific steps that companies use to verify their financial accuracy. These steps are:
· Identify transactions
A company identifies transactions made in bookkeeping and records them accurately. An accountant uses software to record these transactions.
· Capture transactions in a journal
The second step is creating journal entries to capture each transaction. Double-entry bookkeeping requires one to record two entries for every transaction to manage an accurate balance sheet and an income statement.
In double-entries, there’s a debit and credit in each transaction that should be equal. Accrual and cash accounting determines the point at which transactions are recorded.
After recording a transaction as a journal entry, post it to an account that is in a general ledger. The general ledger breaks down activities by account. An accountant can monitor the financial status by account. The cash account in the general ledger is frequently used to show the availability of cash.
· Unadjusted trial balance
The unadjusted trial balance shows the entity’s unadjusted balances for each account. The trial balance determines that the total debits and credits are equal.
Analyzing a worksheet is the fifth step in the financial cycle. An accountant ensures the worksheet balances so that adjustments are made on the page if there is an error.
· Adjusting journal entries
This is the sixth step. The entries are adjusted at the end of the financial period. The adjustments are due to corrections on the worksheet page and are captured as journal entries on the worksheet page.
· Financial statements
After a company adjusts entries, it creates financial statements. These are the balance sheet, income statement and statement of cash flow.
· Closing the books
The last step is closing the books, which is done at a specific date to mark the end of the financial cycle. A company does closing entries and generates a post-closing trial balance whereby debits and credits should match before the cycle begins. Closing the books allows a company to file paperwork and prepare for future financial events. All these steps are finalized once the conversation of, “help me prepare financial statements” has been brought up in an organization.
A great example of an accounting cycle visual representation is as below:
Which accounting software is available?
Accounting software makes the processes much easier and faster than manual bookkeeping on a book page. There is a wide range of software to choose from that offer excellent service. They make applications more manageable, such as issuing a credit note, raising an invoice, etc. Here are a few examples to give an idea of what’s available.
What is the accounting equation?
The equation is also called the balance sheet equation, and it shows how assets, liabilities and owners equity are related in a business entity. Below is an example of an accounting equation diagram:
What are the basic accounting principles?
These principles are set guidelines that an accountant must follow when conveying accounts information. They definitely answer calls to the phrase, “help me prepare financial statements.” They set standards and are better explained below:
· The revenue principal
The revenue principle is where an accountant records a transaction as revenue. It states that the business earns and records its revenue at the point where a sale is made. Revenue is made where the buyer possesses the item legally purchased or receives services purchased.
· Expense principle
The expense principle determines when the bookkeeper records an expense in the books. Here, an expense occurs when the entity receives goods or services provided by another entity.
· Matching principle
It states that one should match each revenue item with an expense item. Match the expense of an item with revenue earned after selling the item.
· Cost principle
It states that one should use an item’s historical cost that appears in the books and not the item’s current cost according to current market value.
· Objectivity principle
It states that one should use only factual data and not subjective values. Data used should be verifiable.
How can one use accounting services?
A company can hire a full-time accountant or contract an accounts company to do their bookkeeping. Accountant services are paramount, and preparation of an entity’s books needs to be done by professionals.
What is the basis of accounting?
They are the methods used to record sales and expenses in financial statements. Accountants use the cash basis and the accrual basis of accounting. Small business owners mostly prefer to use cash basis to record income. Small business owners are also prone to ask, “can you help me prepare financial statements?”
What is double-entry accounting?
Double-entry accounting is a bookkeeping process whereby an entry in one account needs a corresponding and opposite entry in another account. It has a debit and credit side, which correspond.
Financial statement analysis homework help topics
These are official written records that show a business entity’s financial activities. They show the financial performance and events of the entity. Users normally say, “help me prepare financial statements” a lot.
An income statement shows a company’s net profit or loss during a given financial period. It shows the income made during a financial period and can be presented on a company’s management report page.
The income statement helps to assess financial health and gauge how much income is earned. It allows accountants to find out if decreasing costs or increasing sales will increase profits. The income statement generally lets an accountant know if their income making strategies are bearing fruit.
Statement of cash flow
The statement shows the movement of cash The statement of cash flows helps accountants evaluate the net income on a management report page.
Financial statement audit
The financial statement audit is whereby an independent auditor scrutinizes a company’s financial statements. The auditor then produces a prepared report in one page or multiple pages with full disclosure of the process.
Financial statement users
· Owners and potential owners
· Stock exchange
· The general public.
Financial statements review
Financial statements review is a service whereby an accountant confirms that an entity’s financial statements don’t need to be modified to conform with financial reporting standards. This comes after the initial plea, “help me prepare financial statements.”
It is a report that shows the financial position of an entity and is made up of assets, liabilities and equity. It is a major part of a management report page.
Unadjusted trial balance
This report shows the company’s unadjusted balances for each account to confirm that the total debits and credits are equal.
Financial reporting framework Homework Ideas
Financial reporting framework
The financial reporting framework is a criterion that determines the recognition, measurement and disclosure of data in prepared financial statements. The framework allows financial reporting to have good standards. They are included in a page of a company’s management report.
Financial Reporting period
A financial reporting period is the time frame that a company uses to report its financial position. It could be anywhere between a month to a year.
Cash basis is when an accountant records revenue when cash is received, and expenses are recorded when cash is paid out. Cash basis is used for smaller purchases in an organization. Small business owners mostly use cash basis, too, as the records are prepared efficiently. Small business purchases also bring up the request, “help me prepare financial statements.”
Accrual basis is a practice of recording transactions when money is earned and expenses incurred. The accrual basis contains bad debts, use of allowances, sales returns and inventory obsolescence.
An annual basis is an investment’s retained earnings earned over a year. It can also be an expense incurred over a year.
A monthly basis is an investment’s return earned over a month. It can also be a cost incurred over a month. Small business owners mostly use it.
Accounts is a relatively complex practice that might take a few years to master. However, once learned, accounts uncover a whole world of transactions and financials that offer limitless job opportunities. Every entity requires well-prepared books of accounts at some level which makes it a very lucrative field to be in. Go to Galaxygrades.com for all of your academic papers and assignments. Just click order now to get immediate assistance.