Every year, the company prepares final financial statements - a balance sheet and a profit and loss account. It is important to be able to read and understand the meaning of these reports.
1. The balance sheet contains information about the financial condition and results of operations of the enterprise at a certain point in time. From the balance sheet you can find out where the funds invested in a given business came from and where they were placed at the time the balance sheet was compiled. The balance sheet reflects all transactions made in the course of the business activities of the enterprise.
2. Assets are all material resources that have monetary value and are at the disposal of the enterprise. Assets are divided into tangible and intangible assets. Tangible assets are the property of an enterprise (for example, buildings, equipment, machinery, vehicles, raw materials inventories). Intangible assets refer to the ownership of a right (for example, a patent or the right to receive profits in the future). All assets included in the balance sheet have a monetary value. However, important factors such as staff management ability, good industrial relations and morale cannot be included in the balance sheet.
Non-current assets have a fairly high cost and a long period of use by the enterprise (buildings, structures, land, machinery, equipment, vehicles, etc.). Because the cost of non-current assets is very high, it is not deducted from profit in the year of acquisition, but is distributed over its expected life in the form of depreciation. Current assets are cash and balance sheet items that can be quickly and easily converted into cash. Examples of current assets are finished goods inventories and accounts receivable (debt from customers to the company).
3. Liabilities Liabilities are the financial obligations of an enterprise. They arise when using credits or loans. Depending on the maturity period, short-term and long-term liabilities are distinguished.
Current liabilities are accounts payable that are due within one year (trade creditors, bank overdraft). Long-term liabilities are accounts payable that are due in more than one year. Long-term liabilities include bank loans (but not bank overdrafts, which are repayable on demand) and unpaid lease amounts.
4. Own capital Own capital is the value of all property of the enterprise after paying all debts. The balance sheet is based on the following balance sheet equation: equity capital = total assets - total liabilities = non-current assets + current assets - short-term liabilities - long-term liabilities The equity capital of an enterprise on a specific date can be calculated in another way: equity capital = initial investments + retained earnings where Retained earnings are earnings reinvested in the business process.
Retained earnings are the remaining earnings after taxes, interest, and dividends. As a rule, it constitutes a significant part of the financing of new capital investments.
5. Cash flow statement The balance sheet contains information about the financial condition and results of operations of the enterprise at a certain point in time. But the cash flow statement reflects cash flows, that is, the actual physical movements of funds from one hand to another in the form of receipts and payments that take place in the course of the business activities of the enterprise. Receipts are funds received by a business. Payments are funds given by the enterprise. Each time a business issues a check, a cash payment is generated. If a check is issued to the company, then there is a receipt of funds. Therefore, there is little opportunity to distort the real state of affairs at the enterprise. Increasing the company's liabilities is a source of funds. A decrease in the company's liabilities indicates the use of funds. Reducing the assets of a business is a source of cash.
An increase in a company's assets indicates the use of funds. The cash flow statement reflects changes in the cash position over a period of time. The opening balance is the amount of cash on hand at the beginning of the period. The closing balance is the amount of cash in the company at the end of the period. Cash flow is calculated using the following formula: balance at the beginning of the period + receipts - payments = balance at the end of the period The cash flow report is not without its shortcomings. It reflects an already existing situation and is historical in nature. For an investor interested in the solvency of a company, a forecast of the company's cash flow would be more useful.
6. Profit and Loss Account The profit and loss account shows the income and expenses of a business from transactions between two adjacent balance sheet dates. It shows the results of the enterprise’s work for this period: whether it made a profit or suffered losses. When preparing a profit and loss account, income and expenses are recognized not when they are paid in cash, but when they are accrued. For example, the sale of goods is considered a fait accompli when the seller has fulfilled the terms of the purchase and sale agreement, and not when money is received for the goods. Income is recognized as received if it can be objectively assessed and the receipt of funds in the future can be reasonably assumed. The profit and loss account is based on the accrual principle, which more accurately compares income received and expenses incurred for the period under review. This allows you to determine the actual values of income and expenses, but many cash movements are not shown.
The profit and loss account does not reflect everything that happened at the enterprise during the reporting period. It does not contain information about facts that cannot be assessed with sufficient accuracy (for example, hiring a new employee). Also, the profit and loss account does not reflect transactions not related to sales (for example, the issue of new shares). Profit and loss account data is much easier to manipulate than cash flow statement data. But the profit and loss account allows, for example, to clearly differentiate between the payment for the electricity consumed last month and the payment for the building that the company will rent for the next 15 years.
7. Calculation of profit Sales volume is the income from the sale of products. Cost of goods sold shows how much it costs a company to purchase or manufacture goods. Gross profit is calculated using the following formula: gross profit = sales volume - cost of products sold. By expenses we mean overhead expenses incurred in the course of sales for a certain period of time. Net profit is calculated using the following formula: net profit = gross profit - expenses Example. In April, sales volume amounted to 200,000 rubles. The cost of products sold is 90,000 rubles, and expenses (rent, salaries, etc.) are 30,000 rubles. Let's determine gross profit and net profit. Gross profit = sales volume - cost of goods sold = 200,000 - 90,000 = 110,000 rubles. Net profit = gross profit - expenses = 110,000 - 30,000 = 80,000 rubles. The profit of an enterprise may depend on a number of artificial factors. For example, if a company merges with another company, the total profit will be greater. It should be remembered that profit and cash are not the same thing. The profit and loss account shows income and expenses for a certain period of time.
But some expenses (rent, insurance, etc.) may be prepaid. Profit is just one of the indicators. Therefore, when analyzing the results of an enterprise’s activities, it is necessary to focus not only and not so much on profit, but on a set of indicators characterizing the financial and property potential of the enterprise.
8. Explanations to financial statements The company accompanies its financial statements with explanatory notes. These explanations contain: 1. information about the accounting methods used (method of calculating depreciation, method of valuing inventories, etc.); 2. a detailed description of some items of assets and liabilities (conditions and terms of debt repayment, terms of payment of rent, etc.); 3. information about the structure of the company’s share capital (conditions of share ownership, etc.); 4. information about the main operations (acquisition of another enterprise, separation of a previously acquired enterprise, etc.); 5. off-balance sheet items (forward contracts, swaps, options, etc.). Often, notes to financial statements provide more information about the true financial condition of an enterprise than the statements themselves. The financial statements of an enterprise provide information about the current financial position of the enterprise, as well as the performance of the enterprise over the past period. Models used in financial planning are created based on financial statements. The financial statements of an enterprise make it possible to outline the main planned indicators.
9. Can financial statements be trusted? The information contained in the financial statements allows you to assess the profitability of the enterprise. If the level of profitability of the enterprise is lower than required, then a more complete analysis of the situation will reveal the reasons for the deviations. Therefore, information should enable the recipient to respond to this information in a timely manner. Incorrect information is often worse than no information, as it can cause actions that will only make the situation worse. How much can you trust financial statements? It is assumed that accounting at the enterprise is carried out by honest, competent people who do not make mistakes in their work. In real life this is not the case. Accountants, like all people, make mistakes.
The use of technical means in calculations allows you to avoid arithmetic errors. But methodological errors (duplication or omission of records, registration of the fact of the economic life of an enterprise in the wrong accounts, etc.) are quite possible. Accounting statements may be distorted due to the poor technical skills of the persons preparing the report. If the accountant's earnings depend on the financial performance of the enterprise, then there may be a wrong desire to embellish the reporting. The balance sheet contains information about the financial condition and performance of an enterprise at a certain point in time. The very next day the balance indicators will change. The company's management is interested in making the balance look as convincing as possible using a number of tricks.
In the last few weeks of the reporting period, the company tries to defer payments to suppliers. But already in the first days of the new financial year, funds will begin to decrease, rewarding creditors for their patience. Accounting always works with a reserve. In the accounting journals you can always find some costs that can reduce the profit margin. You can write off a little more inventory, non-current assets, bad debts, or slightly overstate the revaluation of inventory. It is always easier to lose some part of your profit than to increase it. The rules and regulations regarding financial reporting are not always clear and unambiguous. Certain wordings leave room for "creative interpretation" in the preparation of financial statements. Financial accounting rules require that all transactions be recorded at historical cost. The balance sheet reflects the assets and liabilities acquired or assumed by a business at various times.
Therefore, the cost of acquiring assets shown on the balance sheet may not reflect the current economic value of those assets. Exchange rate fluctuations can also distort balance sheet data if the business has assets and liabilities in foreign currencies. From all of the above, it follows that in assessing an enterprise you should not rely entirely on financial statements. This is only part of the information available, although it is an important part. Other sources of information include financial publications, local press, clients and competitors of the enterprise, and employees of the enterprise.
What reports should be prepared at the enterprise?
Where can I get the necessary information?
How are these reports related?
The first thing you need to understand is the difference between the cash flow budget (CFB) and actual cash flow indicators. In the first case, when it comes to BDDS, it is assumed that exclusively planned revenues and expenditures will be generated in monetary terms; in the second case, it is supposed to fill out actual indicators based on the results of the enterprise’s operation for a certain period (usually a month).
We will call the document on actual receipts and expenditures a report on the execution of BDDS (however, in this context we do not confuse it with mandatory accounting reporting - a cash flow report; to generate an accounting report, you must be guided by the requirements of Russian accounting standards RAS). Both documents - the BDDS and the report on its execution - relate to management reporting, therefore, unlike mandatory accounting statements, there are no clear rules regarding their formation, and therefore some enterprises, represented by a responsible employee, can exclude VAT from the amounts of inflow and cash outflow.
However, this is not true, because the company pays money, for example, to the supplier for raw materials and materials, including VAT (if this material is subject to VAT), and receives money, for example, for shipped products, also including VAT.
The generation of P&L type reports (Profits and Losses - profit and loss; income and expenses) on a monthly basis is also related to management reporting (not to be confused with the mandatory accounting document - the Statement of Financial Results).
In the budgeting system, the so-called budget of income and expenses (I&C) is used to reflect planned indicators, and to reflect the actual indicators based on the results of the enterprise’s operation for a period (for example, a month), a report on the execution of the I&E is used.
Since both documents are intended to manage the efficiency and profitability of the enterprise as a whole, we strongly recommend not to include VAT in the indicators presented in it, so as not to “distort” financial results (after all, the VAT received, for example, as part of revenue is not our income). However, this does not prevent some enterprises from generating a BDR, a report on its execution or a P&L report including VAT. Let us repeat: this presentation of data is not entirely correct and it is still worth “cleaning” your income and expenses from taxes.
Many people mistakenly believe that by including VAT in both cash flows and income/expenses, or vice versa, excluding tax in both cases, that in this way they will “bring these reports closer to each other,” but this is fundamentally wrong. The indicators reflected in the reviewed budgets and reports) will not be identical:
- for income and expenses (BDR, report on its execution), the documents include income received only from sold products, and expenses associated with the production and sale of these products. And at the same time, during the reporting period, the enterprise could spend money on products that were not sold and not shipped in this period under review (finished products in the warehouse or work in progress), but all these expenses will not be included in the specified document;
- To reflect cash flows, the documents include all outflows and inflows of funds without reference to sales and shipments.
Formation of auxiliary budgets and reports on their execution
Budgeting as a system involves managing the cash flows of an enterprise. This allows you to balance income and expenses, increase the solvency of the enterprise, and also improve the planning process as a whole.
Budgeting, as a rule, is carried out for the entire year (sometimes for 13 or 14 months - “capturing” the first / first months of the next calendar year) with a mandatory monthly breakdown. Actual indicators are usually entered at the end of each reporting period (month). We will consider budgets (plan) and reports (actual) based on the results of the enterprise’s work for the month.
Any planning begins with the formation sales budget (sales plan).
The sales budget represents the planned sales volumes for each month for all types of products during the reporting period (usually a calendar year). Sales volumes are forecast based on an analysis of the market, its conditions, competitors and their pricing policies, including potential ones, an analysis of one’s own competitiveness, realistically assessing one’s strengths and weaknesses, and an analysis of potential buyers and their payment capabilities.
When filling out the actual, so-called reporting side, it is enough to have information about the actually shipped products. Additionally, please note that if an enterprise has several product units, or in addition to producing products, it provides services, then to calculate the total revenue it is necessary to keep records for each type of product or service provided, summing up the total revenue.
Let's conduct a plan-actual analysis of product sales for the reporting month (data are presented in Table 1).
As we can see, the product sales plan has not been fulfilled in quantitative terms, and as a result, it has not been fulfilled in value terms either.
For convenience, in this case we have highlighted VAT in revenue and tax-free revenue as separate lines, which will make it easier to “transfer” data from one document to another in the future. And since this reporting is managerial, in other words, internal, we can modify the forms of reports as we wish, depending on the assigned tasks.
The next important operational plan-report is cash flow schedule. The planned side of revenues is formed on the basis of the sales budget and payment terms in accordance with concluded agreements.
The schedule must include information about accounts receivable balances at the beginning of the analyzed period.
Visually, the schedule is a checkerboard table due to the fact that payments for product sales are not received in full in the same month in which the sale is planned.
The company receives money including VAT (see line 3 of Table 1). For example, consider the following advance conditions: prepayment per month of shipment 40% and deferred payment for shipped products 1 month 60%.
Thus, for shipped products in the amount of RUB 2,250,000.00. (plan with VAT) per month X the enterprise will receive 40% - 900,000.00 rubles, and in the month X+1 60% — 1,350,000.00 rub.
Thus, in a month X a receivable in the amount of RUB 1,350,000.00 arises, i.e. the products have been shipped in full, but the final payment for them has not yet been received (the buyer owes the supplier). Based on the calculated data, we will create a graph (Table 2).
Let us assume that there are no accounts receivable at the beginning of the period under review. Actual data is filled in according to accounting information about the fact of receipt of funds from customers (including VAT).
In our example, an advance payment of 40% was paid in accordance with the plan and terms of the contract. However, in the month X+1 actual balance of accounts receivable at the beginning of the period (corresponding to the balance at the end of the month X) decreased from RUB 1,350,000.00. up to 1,275,000.00 rubles, since the company shipped products not worth the planned amount of 2,250,000.00 rubles. (1500 pcs.), and 2,175,000.00 rub. (1450 pcs.).
The next stage is the formation of a production budget. The production volume may exceed the sales volume in quantitative terms: the enterprise produces more than it ships, the difference remains in the warehouse of finished products. Or, conversely, the production volume in a particular month may be lower than the sales volume: the enterprise shipped part of the products produced in a given month, and part of the products from the finished goods warehouse.
Often, notes to financial statements provide more information about the true financial condition of an enterprise than the statements themselves. The financial statements of an enterprise provide information about the current financial position of the enterprise, as well as the performance of the enterprise over the past period. Models used in financial planning are created based on financial statements. The financial statements of an enterprise make it possible to outline the main planned indicators. Can financial statements be trusted? The information contained in the financial statements allows you to assess the profitability of the enterprise. If the level of profitability of the enterprise is lower than required, then a more complete analysis of the situation will reveal the reasons for the deviations. Therefore, information should enable the recipient to respond to this information in a timely manner.
How to write a financial report
It does not contain information about facts that cannot be assessed with sufficient accuracy (for example, hiring a new employee). Also, the profit and loss account does not reflect transactions not related to sales (for example, the issue of new shares).
Profit and loss account data is much easier to manipulate than cash flow statement data. But the profit and loss account allows, for example, to clearly differentiate between the payment for the electricity consumed last month and the payment for the building that the company will rent for the next 15 years.
Calculation of profit Sales volume is the income from the sale of products.
Preparation of financial statements
But the cash flow statement reflects cash flows, that is, the actual physical movements of funds from one hand to another in the form of receipts and payments that take place in the course of the business activities of the enterprise. Receipts are funds received by a business.
Payments are funds given by the enterprise. Each time a business issues a check, a cash payment is generated.
If a check is issued to the company, then there is a receipt of funds. Therefore, there is little opportunity to distort the real state of affairs at the enterprise.
Attention
Increasing the company's liabilities is a source of funds. A decrease in the company's liabilities indicates the use of funds.
Reducing the assets of a business is a source of cash.
How to make a financial report: where to start?
It is also worth noting that small businesses, whose responsibilities do not include conducting an audit of financial statements, do not submit financial statements in Form N 3 (statement of changes in capital), in Form N 4 (cash flow statement), in Form N 5 (appendix to the balance sheet) and an explanatory note. Of all the above forms, the main ones are the statement of losses and profits, as well as the balance sheet.
11 foods that contain more potassium than bananas Check out the list of foods that will provide your body with an impressive portion of potassium... Main course 13 signs that you have the best husband Husbands are truly great people.
What a pity that good spouses don't grow on trees. If your significant other does these 13 things, then you can...
Marriage Our ancestors slept differently than we do.
The easier it is to release investments, the higher the liquidity of the asset. On the other hand, each liability has its own degree of urgency - something needs to be returned quickly, something may be with the company all the time. The balance sheet helps you see the current state of the money and correlate liquidity and urgency. Balance sheet Current assets Liabilities Cash on hand 10,000 ₽ Accounts payable 90,000 ₽ Coffee beans 30,000 ₽ Paper cups 10,000 ₽ Fixed assets Capital and reserves Coffee machine 40,000 ₽ Own capital 10,000 ₽ Coffee grinder 2 0,000 ₽ Retained earnings 10,000 ₽ Assets 110,000 ₽ Liabilities 110,000 ₽ Cheat sheet
- 1. Reporting helps to avoid making mistakes, serves as the basis for management decisions and gives the entrepreneur the opportunity to see the business as a whole.
Financial statements are
Incorrect information is often worse than no information, as it can cause actions that will only make the situation worse. How much can you trust financial statements? It is assumed that accounting at the enterprise is carried out by honest, competent people who do not make mistakes in their work.
In real life this is not the case. Accountants, like all people, make mistakes. The use of technical means in calculations allows you to avoid arithmetic errors. But methodological errors (duplication or omission of records, registration of the fact of the economic life of an enterprise in the wrong accounts, etc.) are quite possible. Accounting statements may be distorted due to the poor technical skills of the persons preparing the report. If the accountant's earnings depend on the financial performance of the enterprise, then there may be a wrong desire to embellish the reporting.
Three main financial statements of an entrepreneur
Each report presents different information that is used in one way or another by a business entity. All material information must be disclosed in such a way that the financial statements are clear and understandable to users.
If necessary, in the explanatory note, the classification of items and monetary amounts given in the financial statements should be supplemented with other information explaining their content. Financial statements must indicate the name of the legal entity, location, reporting date and reporting period.
The following should also be provided: a brief description of the type of activity of the organization, its legal form and the unit of measurement in which the financial statements are presented. Financial statements must show relevant data for the previous period.
Financial statements are prepared in the currency of the Republic of Kazakhstan; unit of measurement is thousands of tenge.
How to prepare financial statements
The report helps analyze the company's obligations - if it is owed more than it is, then everything is going well. If it's the other way around, it's time to change something. It is useful to consider DDS and OPU in conjunction.
The first report shows the actual flow of funds, and the second - the obligations that the business has assumed. If you don’t go into details, the DDS tells you what is happening with the money now, and the OPU tells you what will happen to it next.
To make informed decisions, it is important to see both. Operating income 800,000 ₽ Cost 600,000 ₽ Profit before tax 200,000 ₽ Tax 40,000 ₽ Net profit 160,000 ₽ Third report. Balance To make management decisions, a business owner needs information. It is useful for him to see the business as a whole - to evaluate and understand all the details. This is what Balance Sheet or Balance Sheet is designed for.
How to prepare financial statements for a company
Profit and Loss Account The profit and loss account shows the income and expenses of a business from transactions between two adjacent balance sheet dates. It shows the results of the enterprise’s work for this period: whether it made a profit or suffered losses.
When preparing a profit and loss account, income and expenses are recognized not when they are paid in cash, but when they are accrued. For example, the sale of goods is considered a fait accompli when the seller has fulfilled the terms of the purchase and sale agreement, and not when money is received for the goods. Income is recognized as received if it can be objectively assessed and the receipt of funds in the future can be reasonably assumed. The profit and loss account is based on the accrual principle, which more accurately compares income received and expenses incurred for the period under review.
How to prepare consolidated financial statements
Financial statements contain the information necessary to develop an enterprise's investment policy, lending policy, estimate future cash flows, assess the resources and liabilities of the enterprise and the activities of its governing bodies. Despite the different interests of different users of an enterprise's financial statements, the main condition for the existence of an enterprise is the adequacy of capital for its activities.
Therefore, the main requirement (other things being equal) is that capital owners and other investors are satisfied with the information they receive from the enterprise. This provision is considered a common feature in the information requests of all users. Financial statements are interrelated because they reflect different facts of the same business transactions.
Each operation is entered into it - income or expense; note who was paid and where they received the money from; divide fund movements into categories. Even in a small business, the number of transactions can go into the hundreds.
The coffee shop purchases grain, water, milk and paper cups; pays the roaster, barista and cleaner; calculated based on rent, taxes and loans. And each of these operations can radically change the position of a business.
DDS will warn the entrepreneur if something goes wrong. DDS Money at the beginning 100,000 ₽ July 1 Prepayment 90,000 ₽ July 2 Advance to employees -60,000 ₽ July 3 Rent -20,000 ₽ July 4 Purchase of raw materials -100,000 ₽ July 5 Loan to the owner 5,000 ₽ Money at the end 5,000 ₽ From even second. OPU or profit and loss statement When an entrepreneur sorts out the receipts and payments of money, the question arises about the profitability of the entire business.
They arise when using credits or loans. Depending on the repayment period, a distinction is made between short-term and long-term liabilities. Short-term liabilities are accounts payable due to be repaid within one year (debt to trade creditors, bank overdraft). Long-term liabilities are accounts payable that are due in more than one year. Long-term liabilities include bank loans (but not bank overdrafts, which are repayable on demand) and unpaid lease amounts. Equity Equity Equity is the value of all assets of a business after all debts have been paid.
Preparation of financial statements
So, we have to talk about the preparation of financial statements by Russian enterprises. First, let's define what we mean by financial statements. In our opinion, this concept includes both internal and external reporting of an enterprise, containing various types of financial information. Traditionally, in our country, external financial reporting is usually understood as financial statements, the form and composition of which, according to Russian accounting rules, are regulated by the following regulations:
At the same time, in the accounting system of the Russian Federation there is no single official document containing the conceptual basis for the preparation and presentation of financial statements.
The composition of internal financial reporting is not legally fixed in any way, it is not organic, and, therefore, depends only on the imagination and needs of the company’s management and may include management reporting, budgets, forecasts, and various types of analyzes of the financial condition of the enterprise.
Since the company is required to prepare external reporting, and there are also very specific criteria and requirements for its form and composition, we will first dwell in more detail on this type of financial reporting.
The components of the financial accounting statements of a company in the Russian Federation are:
Balance sheet,
Gains and losses report,
Statement of changes in capital,
Cash flow statement,
Notes to financial statements.
The statement of changes in equity and the statement of cash flows are presented as appendices (notes) to the balance sheet and income statement, rather than as primary forms of reporting (as is expected, for example, under IFRS principles).
Another interesting feature of Russian reporting is that the cash flow statement is sometimes not included by companies in the consolidated statements, despite such a requirement in regulatory documents, based on the principle of rationality (the so-called “balance between costs and benefits”). That is, if compiling a consolidated cash flow statement takes a lot of time and effort, then it is possible not to submit it. The main thing is that you can convince your tax office that this is truly irrational.
The Ministry of Finance of the Russian Federation approves special financial reporting forms recommended for use by organizations. Despite the fact that the recommendations are not binding, in practice companies never deviate from the Ministry of Finance forms and monitor all changes and additions, carefully study all letters and instructions for filling out these forms, so as not to have problems with submitting reports to the tax office. This is due to the fact that the principle of the predominance of the content of a document over its form does not yet work in our country.
All accounting and reporting documents (including financial statements) must be drawn up in Russian or have an official translation into it. That is, if a company works with foreign counterparties, then the primary documents must be presented in at least two languages.
The financial (reporting) year in Russia is the calendar year. Therefore, the reporting date for annual reporting for all organizations is December 31st. Presentation of comparative financial information is only required for the previous period - that is, your balance sheet for 2009 must contain two columns of figures - as at 01 January 2009 and as at 31 December 2009, and the income statement for 2009 must include column of profit and loss figures for the previous year 2008. (Note: issuers whose securities prospectus is registered with the federal executive body for the securities market are required to submit a complete set of financial statements for each of the last three years, that is, in our case, for 2009, 2008 and 2007).
If the parent company is an issuer of securities traded on the open market, or if its shareholders (participants) require it, it must form consolidated financial reporting in accordance with RAS, except for the following cases:
- Consolidated financial statements are prepared that comply with IFRS requirements;
- The company itself is a subsidiary, 100% of the voting shares or authorized capital of which belongs to another parent organization, and conducts its business activities exclusively on the territory of the Russian Federation, and its parent organization does not require the preparation of consolidated statements;
- The company is a subsidiary that is virtually fully owned by another organization (which is the parent and owns 90% or more of the voting shares or authorized capital of this subsidiary), and conducts business activities exclusively on the territory of the Russian Federation, and the minority shareholders (participants) of the specified subsidiary do not require the preparation of consolidated statements.
It is important to point out that the parent company has an additional obligation to prepare its own (non-consolidated) financial statements.
In addition to the above listed forms of financial statements, there are also explanatory note , compiled by the chief accountant, which reveals the main provisions of the company’s accounting policy, as well as provides additional information showing the dynamics of the most important economic and financial indicators of the organization’s activities over a number of years, as well as the planned development of the organization.
Securities market participants are required to disclose such additional information in addition to the financial statements. (Other companies do this of their own choice to the extent determined by themselves). We list the information required to be disclosed for listed enterprises:
Information about significant ongoing operations;
Information about the issuer's fixed assets, including details of investment plans, pledged or otherwise encumbered fixed assets;
Information on the issuer's export operations;
Information on significant movements of assets after the reporting date;
Information about participation in any legal proceedings that may have a significant impact on the issuer’s performance and financial position;
Information on the size and structure of the issuer's capital;
Cash management details;
Information on financial investments and the amount of formed assessment reserves for their impairment;
Information about the basis for assessing intangible assets contributed to the authorized capital, R&D expenses over the past five years, as well as the policy adopted by the issuer in the field of scientific and technological development,
Analysis of industry trends and issuer development over the past five years.
Now that the scope of what needs to be prepared has been determined, it’s worth talking about how to do it all on time and efficiently.
First, it is necessary to determine who is responsible. Well, naturally, this can only be the chief accountant - he is the one who will have to report to all interested parties regarding the financial reporting indicators: to management, tax inspectors and auditors. We will not touch upon such exceptions as small businesses, where the general director is a courier, an investor, and a chief accountant all rolled into one.
Further, depending on the size of the company’s activities, in the accounting structure there may be a different distribution of roles and those responsible for various blocks of accounting reporting: most often, again, the chief accountant or his deputy is responsible for the preparation of basic forms (as well as for the preparation of consolidated data), and individual accounting employees may already be responsible for maintaining records by sections and preparing separate blocks of notes for reporting. The most typical breakdown of accounting sections by area of responsibility in a medium-sized company looks something like this:
Salaries and deductions from the payroll (70, 71, 69 accounting accounts), this may also include settlements with accountable persons, but sometimes this block is taken beyond the responsibility of the company’s accounting service and is a headache for the treasury department (50, 71, 73 accounts );
Fixed assets and materials (in enterprises with a large turnover of inventories, of course, it is advisable to separate these two sections into two different people or groups of people);
Suppliers and contractors (60, 76 accounts);
Buyers and customers (62 account);
(these employees are responsible for postings related to the formation of revenue and costs, for signing reconciliation reports with counterparties);
Cash and current accounts (50th accounts) - in modern companies this function is completely under the control of the treasury department, and not the accounting department, which allows improving the company’s internal control system;
Deferred taxes (usually the calculation of IT is carried out either by the chief accountant himself or by his competent deputy, since ordinary accounting employees often have a narrow specialization and they lack the competence to be responsible for such a complex section of accounting).
Of course, depending on the company’s activities, these sections will be supplemented by others (for example, if the company’s financial activity block is well developed, there will also be a section of financial instruments).
After identifying areas of responsibility and setting priorities, a schedule for preparing financial statements should be clearly developed and brought to the attention of each accounting employee. It should be borne in mind that data consolidation, reconciliation, and analysis of final figures also require time, therefore, if the deadline for submitting reports to the tax office is March 31, it is necessary for the chief accountant to have a draft of the final version of all forms and components on his desk at least a week in advance reporting elements.
Now let's move on to the issue of compiling internal financial statements of the company. Here it is difficult to talk about the unification of forms, since there are as many options for forms of management reporting as the number of requests from management that the departments of management (operational) accounting, budgeting, controlling, accounting, treasury, IFRS and other departments whose work is related to the processing of financial data can receive . Let's try to determine the main list and composition of information that is exactly necessary for a competent manager when making management decisions, and we will leave the determination of the form and structure of reporting forms to the discretion of our dear readers.
|
Responsible department |
Reporting information |
|
Budget department (optionally – planning or financial control department) |
|
|
Treasury Department |
|
|
|
|
Human Resources Department |
|
|
Management Accounting Department |
|
It is also worth mentioning that there are budget financing companies, as well as financial institutions, whose activities are additionally regulated by Russian legislation. For organizations in these sectors, an extensive list of regulations has been created, which stipulate various obligations for the presentation of financial and statistical reporting - in addition to accounting.
Regular preparation of financial statements, their analysis, and comparison of the figures included in them for different reporting periods allows you to:
Identify a large number of interdependencies between various indicators of financial and economic activity,
Understand the dynamics of company development,
See the most (or least) effective areas of activity,
Compare the work of different departments,
Identify available funds.
And in general, this pursues such an important goal as improving the internal control system in the company, so the development and improvement of the internal reporting system should not be neglected.
Advice from an Expert - Financial Consultant
Photos on the topic
Financial statements are a certain set of accounting indicators, which are reflected in the form of tables characterizing the movement of property, liabilities, as well as the financial position of the company for the reporting period. Also, this report includes a data scheme about the financial situation of the organization, the results of its activities, as well as changes in its financial position. A report is drawn up based on data taken from accounting. Just follow these simple step-by-step tips and you will be on the right track in solving your financial issues.
Quick step by step guide
So, let's look at the actions that need to be taken.Step - 1
Compilation financial reporting includes two main stages: preparation of materials and its subsequent compilation and presentation. In preparation for preparing financial report it is necessary to complete all existing accounting transactions that occur at the end of the reporting period, and also check all financial data necessary for reporting. Next, move on to the next step of the recommendation.
Step - 2
At the same time, when preparing the financial statements, calculate the taxes payable, take an inventory of the company's property and correct any errors found in the accounting records for the given period. Next, move on to the next step of the recommendation.
Step - 3
Prepare financial statements in accordance with the described requirements, as well as in accordance with various methodological departmental guidelines. Financial statements must be submitted on time to all interested authorities, the list of which is also determined by law, and this document must be signed and certified in accordance with all document requirements that are applicable to financial statements. Next, move on to the next step of the recommendation.
Step - 4
Financial statements must include a variety of documents. First of all, the balance sheet. After all, this document reflects the financial position of the enterprise in the reporting period. Next, move on to the next step of the recommendation.
Step - 5
You can supplement the annual financial statements with an explanatory note. In it, explain the moments of filling out all financial reporting forms, give other required explanations, with the help of which this reporting is made more objective and clearer. Next, move on to the next step of the recommendation.
Financial Statements In accordance with IFRS 1 Presentation of Financial Statements, a complete set of financial statements includes the following:
Step - 6
In turn, you can use charts, graphs or tables in your explanatory note. In the text of the explanatory note, explain the principles for assessing all production reserves of the enterprise, give an analysis of their use, explore ways to make the most full use of the company's potential, as well as improve the skills of workers. Next, move on to the next step of the recommendation.
Step - 7
Attach report about profits and losses to the financial statements. It characterizes in detail all the financial results of the company for the reporting period. Next, move on to the next step of the recommendation.
Step - 8
Also include the following reports in your reporting: on the movement of capital of the enterprise - this document will be able to show how the composition of the company’s funds is changing; a statement of the flow of all funds, which will allow you to get an idea of the expenditure of these company funds, their receipts and balances. Next, move on to the next step of the recommendation.
Step - 9
Reflect in the financial statements information about the company's borrowed funds, its debts and loans.
We hope the answer to the question - How to make a financial report - contained useful information for you. Good luck to you! To find the answer to your question, use the form -
Loading...
