Financial reports play an important role in business operations. So, you have to understand how to make simple financial reports.
No matter how small your business is, there must be financial reports in it. How to make simple financial reports for small businesses will be more concise than large-scale ones.
However, for large-scale businesses, it is certain that there must be financial reports. In addition to streamlining administrative processes, it also facilitates business financial management.
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Even though we will study making simple financial reports, they must be made in the correct order of financial reports.
Before discussing the flow and method of making simple financial statements, we recall the definition or meaning.
Meaning of Financial Statements
The financial report is a summary record of all transactions in one period or one year of accounting for a company or business entity.
Every type of business in various scales is required to prepare these financial reports. Because from this report we can identify the financial condition and performance of our business in one period. So you could say that using online accounting software is a mandatory choice for companies.
Also from this report, an entrepreneur can make decisions regarding his business in the future.
Therefore it is very important for you to understand financial reports. You can start by learning how to make simple financial reports first.
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How to Make Simple Financial Reports Easily
Often business owners run their business without the hassle of making notes on various transactions made.
In fact, these notes will facilitate the preparation of financial reports, to be used as needed.
For beginners, you can make manual financial reports. Record in a special notebook for each type of transaction made. However, if you are still overwhelmed, you can help with a company financial reporting application that can be operated automatically.
Still confused? Here’s how to make simple financial reports that are easy and you can try.
1. Make a Special Spending Book
In this book, you can record every expense, no matter how small. It would be better if you already have this expense log before starting the business.
The function of this record is to make it easier for you to balance cash at the end of the period.
2. Create a Special Income Book
It’s not just expenses that are important to record, OK! All forms of income must be recorded.
This will make it easier for you to monitor the balance of your ongoing business. You will really need these records at the end of the month, the end of the quarter and also the end of the year.
So make sure you record all income every day. This includes debts that have already been paid off.
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3. Create a Goods Stock Record Book
As a business person, you are not only obliged to monitor financial flows.
The entry and exit of goods must also be monitored and recorded.
Therefore you have to make a special inventory record book. You could say that this stock book is the simplest financial report, because it doesn’t record finances.
However, from the incoming and outgoing traffic of goods, you can identify how productive the business you are running is.
4. Create an Inventory Notebook
This book contains records of all items owned by the company you run. Both the items you buy or those obtained from grants are then cared for.
The function of this record is to serve as a basis for identifying the stability of the company. You will really need these records for the financial statements at the end of the period in the business bookkeeping application .
5. Summarize Master Cash Records
The last way to make simple financial reports is to summarize the main cash.
This book is very important for you to make, because it not only provides data, but also serves as a basis for financial reports.
In this summary record, it contains all income and expenses, both in the form of goods and money.
From this record you can see the profits or losses experienced by the company.
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Proper Sequence of Financial Statements
After understanding how to make financial reports easily and simply, now is the time to move on to preparing financial reports in order.
The following is a sequence of financial statements that you can apply.
1. Make a Trial Balance
This balance sheet contains a list of general ledger accounts, where the balances are in the debit or credit columns.
A new trial balance is prepared after the existing journals have been recorded in their respective accounts in the general ledger.
Information in the trial balance is used to check the balance of credits and debits for all accounts in the general ledger.
This is also the initial stage of preparing a work sheet and also adjusting journals.
2. Make Adjusting Journals
Various transactions that are missed to be recorded, and are not in accordance with the conditions at the end of the period, are collected in this adjusting journal.
Adjusting entries are made at the end of the period to adjust the estimated balance to the actual situation before the preparation of the financial statements.
The existence of this journal also presents company financial data, so that companies can make the right decisions.
3. Create Worksheets/Worksheets
Work sheet is needed to facilitate the preparation of financial reports. From trial balance to data adjustments refer to adjusting journals.
When the balance has been adjusted, it will appear in the adjusted trial balance column. Where is the balance that will be reported on the profit/loss report as well as the balance sheet.
4. Make Reports on Changes in Capital, Profit/Loss and Other Reports
In the work sheet, the amounts to be reported in both profit/loss and balance sheet have been separated.
Then you can immediately work on the various reports above on the work sheet. You only need to change the form of the two reports above, to make it easier to read and analyze.
5. Make Adjustments and Close Accounts
Furthermore, when all the accounts in the general ledger have been adjusted, it’s time for you to close the nominal account on the income statement .
Next, you can transfer the loss/profit balance to an undivided profit account.
Finally, you must record all information from the journal into the general ledger according to the related account.
6. Make a trial balance after closing
In order to be able to check the balance between debits and credits from accounts that are still open, create a trial balance after closing.
Make sure the contents of this balance sheet are only real accounts, so they don’t include nominal accounts that have been closed.
Well, that’s the correct sequence of financial statements. Make sure you make financial reports in order, apart from making it easier to make sure the report data is more valid.
Financial reports are important and very crucial for your business. Therefore, both small, medium and large businesses are required to have financial reports.
In order to be able to make examples of financial reports that can provide accurate information, you must understand the correct recording and preparation steps.
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You can use the manual method first if your business is on a small scale. But if your business is medium or even large, of course the financial reports will be even more complicated.
You can take advantage of integrated accounting programs in compiling financial reports. That way it will be easier, practical and also fast processing.
Even the possibility of errors can also be minimized.