It is necessary to go through various stages for the preparation of financial statements. In this article, we talked about these stages and the importance of financial statements.
Why is it necessary to prepare financial statements?
Financial statements are important documents for measuring the financial and economic performance of a company. Financial statements are used to measure the financial health of the company, monitor income and expenses, minimize and properly plan expenses, organize income growth, make investment decisions and check compliance of all these processes with legislation and standards. The issue of preparation of financial statements is of interest to the company's employees, investors, auditors, banks and other parties.
Stages of preparation of financial statements
The process of preparing financial statements is broadly related to the collection, organization, analysis, preparation, verification, and presentation of financial and economic data. The main stages of this process include:
Data collection
The first stage in the preparation of financial statements is the stage of data collection. Information is stored in various information systems, as well as bank accounts, checks identifying purchases and sales, etc. gathered together. At this stage, it is necessary to make sure that the information is complete and correct. Incomplete data or wrong data can cause reports to be generated incorrectly, which can lead to huge losses.
Data systematization
At this stage, income and expenses are systematically grouped. This helps measure the relevance of the collected data to financial transactions. Income and expenses, assets, loans, etc. such groupings are carried out. Such systematization also makes information more understandable and faster to access.
Data analysis
Systematized data is processed with certain analysis methods. Data analysis helps to understand changes and innovations, sources and customer behavior, evaluate financial and interest rates and make strategic decisions. It allows to measure the financial performance of the company and to clarify and analyze the causes of existing financial events.
Preparation of reports
Based on the results of the analysis, financial reports are prepared. These reports mainly include basic financial statements, income and expense statements, cash or cash flow statements, accounting policies, changes in equity, and cash flows. During the preparation of reports, it is important to ensure compliance of these reports with local and international financial standards. It also makes it easier for investors or other interested parties to benchmark a company's financial statements against other companies and make forward-looking decisions.
Audit and approval
Prepared reports are checked by auditors. During the audit, the accuracy of reports, reliability of data and compliance with legislation are checked. Also, the auditors check the compliance of the reports with the financial standards and note the accuracy of the data or other aspects.
Submission of reports
After the audit process is completed, reports are made available to relevant stakeholders. This process involves providing information to relevant parties to assess the company's financial performance. The presentation of reports is made available to the wider community, partners, investors, auditors, banks and other interested parties.
And finally:
The process of preparing financial statements requires expertise in finance, accounting and economics. Therefore, it is the right step to turn to an experienced person or companies that do this work for the financial statements of a company to be true, accurate and reliable.
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As a Macis Consulting company, we provide a number of services to business owners who want to operate both as an individual entrepreneur and as a legal entity. Our company has been providing its business partners with both forms of business creation, accounting services, audit and legal process services for years. Contact us get all the accounting, financial and legal services your business needs.
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