Preparing financial statement is a crucial part of the accounting process. There are some other points to notice to create a reliable financial report.
The main objectives of financial statements are:
- To provide the financial position and performance to inform other parties such as investors, creditors, and government for business decision making.
- To show management accountability regarding the use of the resources entrusted to them.
A qualified financial report is made based on the determined requirements to meet the business goal. To achieve the goal, preparing and presenting financial statements should notice some necessary points:
- Reporting Currency
The financial statements should reflect the actual company conditions, including the use of currency. If the daily transaction uses Dollar currency, then the financial statements also presented in Dollar currency. What about if the company applies some foreign currencies?. In case the company can use the most widely used currency, also known with the term “functional currency.”
- Recording transactions regularly
Any transaction must be recorded regularly and should not miss one single transaction. A regular recording will obtain an accurate information of business activities.
- Make separate post between personal and business finance
Separating the personal and business account will help you to monitor the business and personal expenses. You will find out your actual amount for your business and the financial statements describe the accurate business expenses.
- Receipt note for recorded transaction
The recorded transaction must have receipt note attached, such as invoice, receipt, etc. It is the way to control the transaction along with the original receipt. These notes will be verified during the audit. Without any receipt, financial bookkeeping is invalid.
- Complete components of Financial Statement
The next vital point is the complete component of the financial statements. The complete financial statements consist of: Balance Sheet, Profit and Loss, Equity Changes statement, Cash Flow on Financial Statements.
- Specific files placement for each transaction
Categorizing the file placement based on the transaction to make the file easily found. The separate file placement includes Sales file, purchase, cash in and out and more.
- Comparative Information
Quantitative information should be stated comparatively to the previous period. The compared financial statements for the last 2 (two) years according to the prevailing regulations.
The Interim Financial Report presented in comparison with the same period as the previous year. The Interim Profit Loss Calculation should cover the period from the beginning of the financial year to the reported interim period.
- Transaction occurred after the date of financial position report
The date on financial position report and issuance date of financial statement usually different. Sometimes transaction occurred between these dates and causes some material consequences to the financial statements. Therefore the financial statement should be adjusted.
- Report credibility
Financial report can be prepared by the internal management or another party (consultant or public accountant firm). The in charge person/ firm that prepares the financial statement should be responsible for the statement made.
