Financial Records: How A Business Prepares Its Financial Statements?

Every business maintains its accounts in a form of books. For example purchases books, sales books, Creditors account, debtors account and etc. Any business that takes production as the way of making profits maintains its financial statements and records and evaluates them at the end of every financial year to analyze the performance and the overall figures of revenues and expenditures. A business usually continues to maintain a trading account in which the overall figure of gross and net profit is calculated.

Trading Account of a Business

Usually, a trading account is drawn at the end of the financial year to see how much was invested and how much was earned back in the form of profits. The figure of turnover is what matters a lot which in some cases is missing to so they work it out with some accounting formula and technique. First they calculate the figure of gross profit by deducting cost of goods sold from the figure of turnover (sales). Following this is the calculation of the net profit figure and this figure has to be correct otherwise the next financial statement i.e. the Balance sheet, its figures won’t be appropriate which might be a big blunder at the corporate level.

A trading account is what covers the figures of both gross profit and net profit parallel to all the costs of goods sold and other expenses.

Cash-Flow Statements of a Business

Cash-flow statements, this term says it all but to further define this term for better understanding, we can say this statement records the overall in-flow and out-flow of finance in a business i.e. how much finance was used for the business purpose from some external source and how much finance was used from some internal source of a business.

Balance Sheet of a Business

This is the final financial statement that a business draws out to find out the overall figures of profit, assets and liabilities, be it current or fixed. In this financial statement, a business also calculates its goodwill through finding out the values of tangible and intangible assets. A balance sheet is what tells a business its overall value on a specific date by covering all the accounting aspects of it. A business has to have auditors and accountants to audit their accounts as they are the professionals who are responsible to carve out the overall value of a business and to let it know whether there were any accounting errors, missing records or missing data.

Usually when any data is missing when auditors audit a business, they take the help of suspense accounts. This way they are able to find out the actual value of a business on a specific date.
[author ]Jared Morrison has been an auditor at Ferguson and completed his article ship parallel to his ACCA in link with coursework writing service where he got his coursework completed as per the board requirements.[/author]

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