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Financial Statements

After any adjusting entries have been made or entered into a worksheet, your financial statements can be prepared using information from the ledger accounts. Because some of your financial statements use data from the other statements, here is a logical order for their preparation:

financial statements
  • Income Statement
    • The income statement reports all revenues and expenses, and provides you with the resulting net income. It is prepared by transferring the following ledger account balances, taking into account any adjusting entries that have been or are still to be made:
      • Revenue
      • Expenses
      • Capital gains or losses
  • Statement of Retained Earnings
    • The retained earnings financial statement will give you the retained earnings at the beginning and end of the accounting period. This statement can be prepared by using the following information:
      • Beginning retained earnings, taken from your previous statement of retained earnings.
      • Net income, this figure can be taken from your income statement
      • Dividends paid during the accounting period
  • Balance Sheet
    • The balance sheet reports the assets, liabilities, and shareholder equity of your company. It is constructed using the following information:
      • Balances of all asset accounts such cash, accounts receivable, etc.
      • Balances of all liability accounts such as accounts payable, notes, etc.
      • Capital stock balance
      • Retained earnings, obtained from the statement of retained earnings
  • Cash Flow Statement
    • The cash flow statement explains any reasons for changes in your cash balance. It should show the sources and uses of cash in all of your operating, financing, and investing activities. This financial statement is a cash-basis report, which means it cannot be taken directly from the ledger account balances of an accrual accounting system. You will have to convert your accrual information to a cash-basis using one of the following two methods:
      • Direct method: cash flow information is derived by directly subtracting cash disbursements from cash receipts.
      • Indirect method: cash flow information is derived by adding or subtracting non-cash items from net income.

Sound confusing and time consuming? IT IS! Why not leave the hard work to the professionals who understand the quickest and most reliable way to prepare your financial statements.

Our experienced Gold Coast team can relieve you of the nightmare of reporting and recording information, and our accuracy is guaranteed. Wherever you are in Australia (or overseas), our experts can make sure your accounting needs are our priority. We make a point of regular contact, either by visiting in person if you are on the Gold Coast or in Brisbane, or via skype, Viber, emails etc for those outside our local area.

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