A Simple Guide to Creating Financial Statements

Creating financial statements is not an easy feat and many of you already know that.
You may have just stepped into the browser to learn how to make financial statement and are feeling a little lost, not knowing where to begin or what details to include.
You’ve already made a few errors in presenting your finances, and now the stakes feel even higher. That’s why you’re here to avoid more costly missteps.
The good news is that it is feasible to create financial statements that are both clear and useful without making any mistakes if you follow basic guidance and get some help.
Read along to learn more about how to create a financial statement from start to end.
Let’s dive in.

What are Financial Statements?

Financial statements are fundamental documents that clearly show a business’s economic health and activities. They summarize key aspects of financial performance and are often reviewed by regulatory bodies, auditors, and investors for transparency, accuracy, and compliance.  

There are three primary types of financial statements: 

  1. Income Statement: Shows your company’s profit or loss over a specified period by summarizing revenues and expenses.
  2. Balance Sheet: Provides a snapshot of your company’s assets, liabilities, and shareholders’ equity at a particular moment in time.
  3. Cash Flow Statement: Tracks the cash entering and leaving your business, offering insights into its liquidity.

Step-by-Step: How to Create a Financial Statement?

Here’s a simple guide to help you prepare them accurately:

 Gather Financial Data

  • Documents Needed: Collect invoices, receipts, bank statements, payroll information, and any existing financial reports.  
  • Organize by Month/Category: Using QuickBooks or similar accounting software ensures data is categorized automatically, making it easier to track income and expenses.
  • Next Step: Ensure all data is updated in your bookkeeping system, which prepares it for direct input into financial statements.

2. Categorize the Data

  • Breakdown: Categorize income (e.g., sales revenue), expenses, assets, and liabilities accurately.
  • QuickBooks Advantage: With QuickBooks accounting services, you can simply automate a lot of the categorization tasks, reducing the odds of errors in the bookkeeping phase.
  • Review: Tally each category, ensuring consistency before preparing financial statements.

3. Prepare the Income Statement

  • Form Structure: This statement summarizes revenue, COGS, and operating expenses, leading to net income.
  • Software Use: QuickBooks can automatically pull these figures from your bookkeeping records, making this step more efficient.
  • Next Step: Calculate net income and review with bookkeeping records to verify accuracy.

4. Prepare the Balance Sheet

  • Key Sections: List assets, liabilities, and shareholders’ equity to showcase your company’s overall financial position.
  • QuickBooks Sync: Use QuickBooks to pull data from bookkeeping, ensuring all values align with your real-time financial data.
  • Next Step: Ensure total balance and check consistency across all statements.

5. Prepare the Cash Flow Statement

  • Components: Start with net income, adjust for operational, investment, and financing cash flow activities.
  • Get Help: Focus CPA simplifies tracking these cash flows, providing a straightforward way to track liquidity and address any cash flow issues.
  • Next Step: Review your cash flow statement in alignment with the income and balance sheet or trust us to do it for you.

6. Review and Finalize

  • Cross-check with Supporting Docs: Verify that values match original documents like bank statements.
  • Confirm Totals: Make sure the balance sheet is balanced, and cross-check values between income and cash flow statements.

With all data verified, you’re ready to share these accurate and timely financial statements with stakeholders or for tax purposes.

Also Read: Small Business Accounting – Focus CPA Group

Can Bookkeepers Prepare Financial Statements?

Yes, bookkeepers can indeed prepare financial statements. Their primary responsibility is to manage and record daily financial transactions, including income, expenses, and other critical details. 

Bookkeepers keep track of the financial data that is then used to prepare financial statements. While accountants typically take on a more strategic role helping with tax planning, audits, and providing financial advice, bookkeepers help ensure that the data required for accurate financial statements is organized and up-to-date.

Read More: How Much Do Bookkeeping Services Cost? Uncovering Average Rates and Pricing

Final Thoughts

If you think that handling financial statements alone will save you money, it might end up costing you more in the long run. It can take a lot of effort to manage these records, and even minor errors can have a big impact on your company’s credibility, cash flow, and compliance. 

Before things get out of hand, invest in trustworthy accounting services that can keep your company financially afloat and investor-ready. 

Additionally, to keep your business right on track within a budget, trust Focus CPA’s services that start at:

Get in touch with us for further assistance! 

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Author

Mr. Amit Chandel

Amit Chandel is a “Certified Tax Planner/Coach”, and “Certified Tax Resolution Specialist”. He has extensive experience in Tax Planning and Tax Problem Resolutions – helping his clients proactively plan and implement tax strategies that can rescue thousands of dollars in wasted tax. 

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