Running a business successfully means keeping track of your finances. Financial statements give you an accurate picture of where your money is going, how much you’re earning, and whether your business is growing or struggling.
But if you're new to this, the question remains, how to make company financial statements simple and efficient?
In this guide, we’ll walk you through everything you need to know about how to make financial statements, why they matter, and how they can help grow your business.
What Is a Financial Statement?
A financial statement is a formal record of a business’s financial activities and position over a specific period. It consolidates important information about the company’s income, expenses, assets, liabilities, and owner’s equity.
This document is essential for business owners and stakeholders because it offers a clear and comprehensive view of the company’s financial health, enabling better decision-making and strategic planning.
Financial statements are not just numbers on a page; they tell the story of how well a business is performing, where money is coming from, and where it is being spent. Without accurate financial statements, managing a business effectively becomes challenging.
How to Make Company Financial Statements Step by Step
If you’re wondering how to make company financial statements simple and accurate, follow these essential steps. Each phase builds upon the previous one to create a complete and reliable financial report.
1. Gather All Financial Data
Start by collecting all relevant financial documents. This includes invoices, receipts, bank statements, inventory lists, asset records, and details of liabilities such as loans or accounts payable.
Gathering this information upfront ensures you don’t miss any transactions and makes the recording process smoother.
2. Create a General Journal
Next, record every financial transaction in chronological order in the general journal. This journal acts like a detailed diary of all financial events, providing a clear record to work from. Each entry should include:
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The date of the transaction
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A brief description
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The amount debited and credited
3. Post Entries to the Ledger
Once entries are recorded in the journal, transfer them to the general ledger, which organizes transactions into individual accounts like:
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Cash
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Accounts Receivable
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Inventory
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Liabilities
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Owner’s Equity
Each account shows the current balance and helps ensure that debits and credits match.
4. Prepare a Trial Balance
At the end of the accounting period, compile a trial balance. This document lists all accounts and their balances to check that total debits equal total credits. If the totals don’t match, it signals an error in recording that must be corrected before proceeding.
5. Make Necessary Adjustments
Adjust your accounts to reflect any financial activities not yet recorded, such as asset depreciation, accrued expenses, or prepaid income. These adjustments are vital to ensure your financial statements represent the true and fair financial position of the business.
6. Prepare the Financial Statements
After adjustments, you can compile the main financial statements:
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Income Statement (Profit & Loss Statement): Shows revenue, expenses, and the resulting profit or loss for the period. This statement helps you understand if your business is generating profit.
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Balance Sheet: Lists your company’s assets, liabilities, and equity at a specific point in time, providing insight into what the business owns and owes.
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Cash Flow Statement: Tracks the inflow and outflow of cash, highlighting liquidity and operational efficiency.
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Statement of Changes in Equity: Details how the owner’s equity changes over time, including investments, withdrawals, and retained earnings.
7. Analyze and Evaluate the Results
With the statements prepared, analyze them to evaluate your company’s financial health. Compare revenues to expenses to assess profitability, check the balance sheet for financial stability, and review cash flows to ensure you have enough liquidity to cover daily operations.
Types of Financial Statements Every Business Must Know
Understanding each type of financial statement helps you grasp the full picture of your business’s finances:
1. Income Statement
This statement summarizes all income earned and expenses incurred during a specific period, ultimately showing whether the business made a profit or loss.
2. Balance Sheet
Think of this as a snapshot of your company’s financial position at a given date. It lists what the business owns (assets), what it owes (liabilities), and the owner’s stake (equity).
3. Cash Flow Statement
It tracks cash movements in and out of the business. This is critical for understanding if your company can meet its short-term obligations.
4. Statement of Changes in Equity
This report explains how the owner’s equity has changed due to profits, losses, or capital withdrawals during the period.
Why Are Financial Statements Important?
Understanding how to make financial statements is only half the story. Knowing their benefits will help you appreciate their value to your business.
1. Informed Decision-Making
Financial statements provide essential data for making smart business decisions. Whether it’s investing in new products, expanding operations, or controlling costs, accurate financial data guides you to make choices that boost profitability.
2. Measuring Financial Performance
They allow you to track how well your business is doing. By reviewing profits, expenses, and cash flows, you can identify areas for improvement or opportunities for growth.
3. Better Business Planning and Budgeting
Using past financial data, you can forecast future revenues and expenses more accurately, making your budgeting process more effective and realistic.
4. Risk Management
By understanding your financial position, you can identify potential risks such as cash shortages or high debt levels and take steps to mitigate them before they become problems.
5. Transparency for Stakeholders
Investors, lenders, and regulatory bodies rely on financial statements to assess the viability and trustworthiness of your business. Clear and accurate reporting builds confidence and supports your business’s reputation.
6. Compliance with Laws and Regulations
Businesses are legally required to maintain accurate financial records. Failure to comply can result in fines or legal consequences.
Let’s face it, managing finances manually can be time-consuming, overwhelming, and prone to human error. But in a business world that moves faster every day, outdated methods just won’t cut it. That’s where innovation steps in.
Telkomsel Enterprise offers a modern, reliable solution with its Pembukuan Digital, designed to streamline financial management for SMEs and large enterprises alike. With customizable features and real-time reporting, managing your financial statements has never been easier.
Interested in simplifying your financial management? Contact Telkomsel Enterprise today to learn how our digital solutions can transform your business’s financial clarity and efficiency.
