📣 Understand basic financial statements

📣 Understand basic financial statements

🔹 What are financial statements?

Financial statements are financial and accounting reports that are structured to show financial position. Business performance and cash flow in each accounting period Closing the financial statements is the reporting of the company's performance. It consists of the following reports:

- Income Statement

- Statement of financial position

- Statement of changes in shareholders' equity

- and notes of financial statements (If you run a business with the word “Public”, you need to add cash flow statements.)

🔹 Closing process of financial statements

1. Collect transaction documents (Income - Expense) - Keep all the financial documents of the business. Sort by date of transaction neatly separated by category

2. Make a ledger - This is a collection of records of transactions that occur into categories. and arrange in the order of the chart of accounts of the business

3. Make a Trial Balance - Create a Trial Balance to show the balance of each account. and used to prove the correctness of numbers

4. Adjust the accounts receivable, accrued and depreciation - complete the outstanding accounts. especially the depreciation account accrued interest, etc.

5. Closing the inventory account into the cost of goods sold account - take all the expenses related to the inventory. Transfer to cost of goods sold account

6. Close accounts of income, expenses, cost of goods sold Enter the profit and loss statement - bring income, expenses, cost of goods sold of the business to affect each other to find profit and loss will know the profit of the business

7. Statement of Financial Position - Shows the balance of the business and how much cash has been concluded. how much receivable How many more products are there for sale? and how much more unpaid debts

🔹 Results of closing financial statements

From the point of view of the business owner The financial statements must show that When taking the numbers of income compared to expenditures How much cash will the business have? Increased cash balance or decrease in each year that comes from doing our business and if you look ahead and see that the money is not enough will be prepared to make a financial plan early

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