Financial Statement Preparation

Financial statements are the vehicle by which you can manage your company. They are also the vehicle by which others (banks when they are about to lend you money or have already lent you money) determine how and how well you manage your company.  Additionally, they are the basis upon which your tax return is prepared.

Financial statements typically are in three forms:

  • Statement of Financial Position – This is commonly known as the Balance Sheet. This statement has the purpose of showing your Assets, Liabilities and Equity. The latter is composed of Net Income and Retained Earnings (Net income from prior periods. This statement is like taking a photographand shows the Financial Position, or condition, of the company at a point in time.
  • Operating Statement – This is commonly referred to as the Income Statement or Statement of Net Assets (for Not-for-Profit entities). This statement will report Revenue, often referred to as Income, Revenue is the amount that is earned in the normal course of business.  This statement will also show Expenses, or the cost of normal operations.  This statement will also show Extraordinary revenue, and Extraordinary expense, which as their names imply, does not normally occur.  Another section of the statement will show Depreciation, which is an expense reflecting the devaluation of an asset over time. Additionally, this statement will have a section for Interest revenue or expense, which is a charge for borrowing money that you have lent to, or borrowed from, someone else.  Finally, there is Net Income (Loss).  This is basically what is left or overspent.
  • Statement of Cash Flows – This is essentially the operating statement reflecting what was actually received or spent. This statement will have a section called Source of Funds, which is where the cash came from.  Another section is the Source of Funds, or where the cash went. Finally, there is the section Net Increase/Decrease in Cash, what is left.

There are other statements that may be needed, which are commonly referred to a Ad Hoc, or as needed.  These would include those statement that may be required by Third-Parties. Third-parties would include, lenders, governmental agencies, other funders or parties to a contract

We can prepare all of these statements, if:

  • You are doing your own bookkeeping. This is called After-the-Fact Financial Statements or,
  • We do your bookkeeping for you. This is called Compilation.