Major Steps Involved in the Preparation of Financial Statements


Financial statements to the formally written records that depict the business activities as well as the financial performance of an organization. These financial statements are very often audited by accountants, government agencies, firms, and others to make sure that they are accurate, along with the need for tax, financing, or investing purposes. The major types of financial statements for profitable entities include a balance sheet, income statements, statements of cash flow, and statements of changes in equity. On the other hand, non-profit entities make use of a similar but different set of financial statements.

Understanding Financial Statements

Financial analysts, as well as investors, heavily depend on financial data to appropriately analyze the company's performance and accordingly make predictions regarding the future direction of the stock price of the company. The annual report of a company, which contains its financial statements happen to be one of the most vital resources of highly dependable and audited financial data. Market analysts, investors, and creditors study the financial statements of a company to evaluate its financial health and potential to earn.

However, the major problem that arises in this regard is preparing the financial statements in a stepwise manner to ensure perfection and accuracy. It is exactly at this point in time that businesses look forward to hiring a professional outsourcing company like SV Impex to prepare financial statements for them. So, let us understand the major steps involved in financial statement preparation.

Verification of Supplier Invoices' Receipt

Start with comparing the receiving log to the accounts payable to make sure that all supplier invoices have been received and then accumulate the expense for each of the invoices that have not been received.

Verification of Customer Invoices' Issuance

The next step is to compare the shipping log to accounts receivable, make sure that all customer invoices have been issued, and then issue all of the unprepared invoices.

Accumulation of Wages That Are Not Paid

In the next step, accumulate the wages that are earned but not yet paid during the end of the reporting period.

Calculation of Depreciation

The next step involves the calculation of depreciation as well as amortization expense of all the fixed assets.

Valuation of Inventories

After the preparation of the tax return, it is to be made sure that filing is done timely without any delay. Then the tax must be paid to the necessary tax jurisdiction. Companies should keep in mind that the due date is applicable for both sales tax return filing as well as payment.

Reconciling with the Bank and Confirmation of Payment

Carry out an ending physical count of inventories or make use of any alternate method to estimate the ending inventory balance. After the valuation of inventories, use the information to come up with the cost of sold goods and record the same in the amounting records.

Reconciliation of Bank Accounts

SV Impex The next step involved in the preparation of financial statements is carrying out a bank reconciliation and recording all adjustments needed to match the accounting records to the bank statement by creating necessary journal entries.

Posting Balances in Accounts

In the next step, it is necessary to post all subsidiary ledger balances to the general ledger.

Reviewing of Accounts

Perform a complete review of accounts and make use of necessary journal entries for adjusting account balances to ensure a match of the supporting detail.

Reviewing of Financials

The next step involves a complete review of the financials, looking out for the errors (if any), and creating the necessary journal entries to rectify them.

Accumulation of Income Tax

Accumulate all income tax expenses based on the accurate income statement.

Closure of Accounts

Then, close all subsidiary ledgers for the reporting period and open the same for the next reporting period.

Issuance of Financial Statements

Finally, it is time to issue the final financial statements based on the available checked and validated information.

How Can SV Help Businesses?

SV is a name that you can blindly trust when it comes to business accounting and finance. The team of proficient experts at SV possess the required skillset as well as the expertise to appropriately deal with business accounts and finance in a seamless manner, ensuring a hundred per cent satisfaction among the business owners. The team of SV will help you prepare your financial statement accurately within the stipulated frame of time to make sure all information is up-to-date and available at your fingertips.

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