Financial statements provide a comprehensive view of a company’s operations. They document the financial positions of an entity, usually by identifying its assets, liabilities, revenues, expenses, and net worth. Financial statements provide information that can help companies make informed decisions about their operations. They help to determine a company’s financial viability.
Financial statements for corporations are filed with a public company filing known as the Form 10-K. Other types of financial statements for businesses may include balance sheet, statement of income, and statement of cash flows. There are specific regulations governing the manner in which these financial statements are prepared. The financial statements must be prepared by people who have been authorized by the board of directors or government authorities. This is an essential part of corporate governance.
Companies generally prepare the financial statements on a regular basis. However, this may not be possible when there are significant changes in financial data, especially in the case of an internal change of control, when a new CEO assumes control of a company, or when a new investor assumes control of the company’s assets. In such situations, it is advisable for the company to use accounting software.
There are two different types of accounting software: general ledger and bookkeeping software. General ledger software is used to record all financial transactions and to make reports on such transactions to shareholders, customers, and government authorities.
On the other hand, bookkeeping software is used to make the financial statements for corporations. Bookkeeping software is used to maintain accounting records that include balance sheets, income statements, and cash flow statements.
A professional accounting firm can be hired to prepare financial statements for a company. Such firms are able to prepare financial statements on a limited basis. These firms usually charge fees for their services.
The financial statements that a company prepares will be made available to interested parties such as shareholders, banks, investors, government authorities, and other financial institutions. In many cases, the accounting firm will prepare the annual report that a corporation files with the Securities and Exchange Commission. The annual report is designed to assist shareholders and other interested parties in making informed decisions about the company. It is essential that the financial reports that a company prepares are accurate.
Companies should consider outsourcing the preparation of their financial statements to qualified accounting firms. These firms are more likely to provide accurate, up to date financial reports. Also, most firms will prepare a detailed budget for the company and provide detailed information concerning future projections. the company will be able to meet its objectives. Most financial reporting firms can provide an analysis of the company’s financial standing, using financial data.
The accounts receivable section will typically be prepared by a financial statement preparing firm if the company’s credit ratings are below “A” status. Companies should consider consolidating or decreasing their accounts receivables to help reduce over-billing and under-payment.
The bookkeeping sections of the financial statements will require the expertise of a tax accounting firm if the company’s tax status is under “A” status. The bookkeeping and tax preparation firm will prepare the company’s income tax return and prepare the financial statements.
When preparing the financial statements, the accountant must keep in mind the general principles of good accounting practice. The accountant must make sure that the financial statements accurately reflect the organization’s financial position at the end of the year.
While preparing the financial statements, a company should also review the documents that they have provided to the company’s potential investors. For example, a company may want to review the company’s balance sheet to find out if the company has any material losses that it needs to be prepared to report on its income tax return.