6 Easy Steps to Making Financial Reports for Beginners

FINANCE - How to make or compile simple financial reports in the right order or flow? Read on for this article to find out more clearly about how to make financial reports, especially for those of you who are still beginners in this matter.

One form of corporate responsibility to stakeholders is to make financial reports. Unfortunately, many companies have not found and have their way of making reports. Many factors cause companies not to have one. One of them is that they do not know clearly how to compile financial information correctly and easily.

To prepare financial statements, you simply process the transaction journals and group them into the general ledger of each asset, liability, and profit and loss group account consisting of sales and all costs.

Definition of Financial Statements

A financial Statement is a structured presentation of the financial position and financial performance of an entity. More clearly in the Intermediate Accounting book, financial statements are defined as a summary of a recording process, which is a summary of financial transactions that occurred during the relevant financial year (Baridwan, 2004).

Both for companies on a large scale and a small scale, financial statements are an obligation that must be made every period.

If likened to, financial journals are the heart of a company.

As an entrepreneur, you must be able to read it to assist you in knowing the company's financial condition and assessing the company's performance in the current year.

Then you can make the right decisions for the company's further operations based on the report.

1. Income Statement, which lists individual transactions and the total money you earn (income) and money you spend (expenses).
2. Statement of Changes in Capital, which presents a summary of changes in owner's equity in an entity for a certain period.
3. The balance sheet is information on how the financial position of the company/entity in a period, usually one year.
4. Cash Flow Statement, which describes the company's cash turnover, regarding the amount of cash in (cash receipts) and the amount of cash out (cash disbursements) in a certain period.

How to Create or Prepare Simple Financial Statements for Beginners?

To make simple financial reports, all you have to do is journalize transactions, post them to the general ledger, create a trial balance, and compile other financial reports.

Very easy isn't it? Yes, for those of you who understand accounting, it will be easy. However, if you are still not familiar with accounting, this might be a problem. Therefore, here we will explain the steps concisely. The following is the sequence or flow of how to make financial statements:

Collecting and Recording Transactions in the Journal

The first step in making a financial summary is to record the transactions made by the company in the current year in the journal.

Transactions are general activities that are often carried out by companies, whether buying, selling, exchanging goods, renting, or other transactions.

Proof of transactions is very important, very important in accounting so that proof of transactions should not be lost.

Transaction evidence is the basis for recording, the form can be in the form of notes, receipts, invoices, or other types of evidence. All transactions related to the company's operational activities must be recorded in the journal in detail.

Posting the Journal to the Ledger

After making a journal, the second step is to post the journal into the general ledger. The general ledger is a breakdown of each existing account. It is not difficult to do this, just move transactions that have been recorded in the journal to the appropriate accounts in detail.

Prepare a Trial Balance

The next step after creating the general ledger is compiling a trial balance.

A trial balance is a list of general ledger accounts with debit and credit balances.

The list of accounts in the general ledger is grouped into a liability group or an asset group.

Collect Data to Make Adjusting Journal

There may be some transactions that have not been recorded or transactions that occur at the end of the financial statement preparation stage and there may still be some that are not by the circumstances at the end of the period, so the data is collected to make adjusting entries.

This journal is made at the end of the period to adjust the estimated balances that will show the actual situation before the preparation of the financial statements.

In conclusion, adjusting journals also play a role in measuring company performance. Adjusting entries present the financial data of a company.

With the adjusting entry, the company's commissioners can take into account the company's next steps.

Compile a balance sheet

To facilitate the preparation of financial statements, we need to compile a worksheet or working paper that starts from the data in the trial balance and is adjusted to the data obtained from the adjusting journal.

Furthermore, the adjusted balance will be seen in the adjusted trial balance column and are the balances that will be reported in the balance sheet and income statement.

Making Financial Reports

The next way to make simple financial reports by the flow and sequence is the reports that have been made in the worksheet, just write them neatly according to the provisions or financial reporting standards.

This is because the worksheet has separated the amounts reported in the balance sheet or income statement.

The information presented in the financial statements is very important because it reflects the company's performance and can be used for decision-making.

Making Closing Journal

After the accounts in the general ledger have adjusted, it is time for you to make closing entries.

To make it, the documents used as the basis for compiling the closing journal are reports of nominal/temporary accounts to the profit and loss account and transferring the profit and loss balance to the unshared profit account.

After that, the information in the journal is recorded in the general ledger according to the account in question. Making Closing Journals

After the accounts in the general ledger have adjusted, it is time for you to make closing entries.

To make it, the documents used as the basis for compiling the closing journal are reports of nominal/temporary accounts to the profit and loss account and transferring the profit and loss balance to the unshared profit account.

After that, the information in the journal is recorded in the general ledger according to the account in question. Making Closing Journals

After the accounts in the general ledger have adjusted, it is time for you to make closing entries.

To make it, the documents used as the basis for compiling the closing journal are reports of nominal/temporary accounts to the profit and loss account and transferring the profit and loss balance to the unshared profit account.

After that, the information in the journal is recorded in the general ledger according to the account in question.