Write a financial statement.

Financial statements are a record of a company's financial activity.The balance sheet, income statement, and statement of cash flows comprise the main components of a financial statement.The shareholder's equity is shown at a specific point in time on the balance sheet.The income sheet shows the revenues, expenses, and income or loss for a certain period of time.The statement of cash flows shows the cash balance at the beginning of a period, the outflows and the inflows during a specific period.The Securities Exchange Commission regulates what goes on these sheets for public companies, in compliance with the Generally Accepted Accounting Principles.If you don't know the standards, you should hire a professional to make sure you are up to date.

Step 1: The basics of the balance sheet can be learned.

The balance sheet shows the company's assets and liabilities.The basic accounting equation is the basis of the balance sheet.You can see that equity is equal to assets.The relationship is reflected on the balance sheet.Assets and liabilities are listed on the balance sheet and subtracted from each other to arrive at a figure for shareholder's equity.Balance sheets can be made using accounting software.You can use a spreadsheet or written list to total your assets and liabilities by category.

Step 2: Find your assets.

Your assets include the cash you have on hand.Assets are divided into current assets and fixed assets.Current assets include the cash you have on hand and what could be sold quickly.You would have accounts receivable, securities due with a year, and your inventory in this category.Pre-payments and deposits can be included, as well as insurance for the next year.Property, plant, and equipment are referred to as fixed assets.These assets have a useful life of more than a year.intangible assets can be held on a balance sheet.Other non-physical assets include patents, brand recognition, and copyrights.All of these assets need actual dollar figures in your balance sheet, these can be calculated exactly or estimated based on industry convention.

Step 3: All the information needs to be written down.

The balance sheet needs to be written in detail.You need to divide each asset into current and fixed by the dollar amount.Add all of your assets together.

Step 4: Do you know your liabilities?

Your company's liability is what it owes to other companies or people.The company's debt is what it is.The assets are divided into two categories.Current liabilities include things like what you owe on lines of credit and credit cards, as well as anything owed to other companies for goods and supplies.The income and wages you've paid out to employees and taxes owed are included.Long-term liabilities are those that will be paid out over a long period of time.

Step 5: Make a record of your assets and liabilities.

You have to account for each liability in major categories, such as loans, mortgages, and so on.Divide your liabilities into current and long-term on your balance sheet.List the value of each category next to the name.To get your total, add up all your liabilities.

Step 6: Subtract your assets from your liabilities.

The shareholder's equity is calculated by subtracting what is owed from what assets you have.A positive amount of equity shows that the company has been able to finance its operations without relying on debt.You should have a line for your total assets.There is a line for your total liabilities below it.The shareholder's equity is shown when you subtract the second from the first.

Step 7: The shareholder's equity should be expanded.

The shareholder's equity section is on your sheet.The shareholder's interests in the company will be represented in this section.Common shareholder's equity categories include common stock, preferred stock and capital in excess of par.To arrive at total shareholder's equity, sum the categories up.Take your total and divide it by the difference between assets and liabilities.Either you or the accountant that keeps the company's books has made a mistake if the figures don't match.The assets, liabilities and shareholder's equity are all on the right side of the balance sheet.The basic accounting equation is represented by this.

Step 8: Net sales should be the first thing to start.

Net sales are the first figure listed in a company's balance sheet.Net sales are the figure used in the income statement.Net sales are the total sales minus any allowances for lost or damaged goods.The company's top line is the truest representation of sales over the period.The income statement covers financial activity throughout the period in question, whether that is a month, a quarter, or a year.The income statement is a reduction of net sales by various expenses faced by the company to arrive at net income, also called net profit or the bottom line.

Step 9: How much do you think gross profit is?

The first calculation on the income statement will be gross profit.After considering the cost of goods sold, gross profit is the company's profit.The cost of goods sold includes all materials and labor used to make them.Subtract it from net sales to arrive at gross profit.

Step 10: List the company's operating costs.

There are two major categories on the balance sheet: operating and non-operating expenses.The philosophy of operating expenses is the same as the cost of goods sold.The expenses are related to the operations of the company.Administrative costs, wages and the cost of selling and advertising products are included.It also includes general expenses, such as utilities, rent, and manager salaries.Remember that materials and manufacturing labor costs were already covered in the cost of goods sold and do not need to be counted here.There are three major categories of expenses: selling, general and administrative.To find total operating expenses, take the amount of each expense and add it to the total.Subtract operating expenses from gross profit to arrive at operating income.

Step 11: Non-operating expenses need to be written down.

Non-operating expenses are the other category of expenses on the income statement.Tax expenses include interest, amortization, and depreciation.There is room in this section to record an "extraordinary gain or loss," which may arise from a large amount of inventory theft.

Step 12: Your income statement is important.

Each piece of your income statement should be laid out.Net sales will be at the top.The pieces will be in sequential order.The net sales should be on one line.Put the cost of sales underneath that.To get the gross profit, subtract the cost of sales from the net sales.Before moving on to operating costs, skip a line.Underneath the gross profit, put the operating costs in general categories.Selling, general, and administrative costs are lumped into one, but not always.Write the operating income that you derived from subtracting operating costs from the gross profit.Each line has the interest and taxes on it.You can subtract them from each other.It gives you more precise data.The net income should be the final line.

Step 13: Net income is the starting point.

The cash flow is important to the company because it establishes the cash you have on hand.Your income includes non-cash expenses and assets that don't affect your cash balance.To create a statement of cash flows, you need a completed income statement and completed balance sheets from this period and the previous period.There are three parts to the statement of cash flows: operating activities, investing activities and financing activities.

Step 14: Cash flows from operating activities should be calculated first.

You're looking at how much cash operations bring in.This step is different from what you did in other statements because of non-cash items.You are focused on cash.The money you have to work with right now won't be affected by the things you add back into the net income.Start with non-cash items.The company spreads out the cost of something over time for accounting purposes.It isn't a cost taking away from cash flow right now.You add that expense back in.The same thing happens with depreciation.It's a number that is taken away from the total amount of an asset.The expense is added back in because it's not a cash flow problem.The indirect method of figuring out cash flow is used.Adding up cash flows from scratch is the direct method.

Step 15: Take your cash flow in the rest of your operations.

You need to look at other items that bring in cash.This category includes gains or losses on sales of fixed assets, as this activity brings in cash.If you have sold property within the period, you need to subtract the operating costs from the gain or loss.There are changes in accounts receivable.If accounts receivable goes down, that means the company has gained cash, and that needs to be added in.If the company has bought inventory, that signals a decrease in cash and needs to be subtracted from the cash flow.Taxes, insurance, and salaries can affect the cash flow.

Step 16: Determine the cash flows from investing.

You need to look at how investing has affected your cash flow.Long-term investments include equipment and buildings.The category focuses on where cash has gone in the current year.Money put into new equipment or buildings that will be subtracted from cash flow can be included in this step.Equipment you've sold can be added to the cash flow.Money invested in the stock market, what you've bought and sold, and how that affects your cash are included in this step.

Step 17: There is cash available from financing.

Financing is the third category.Money that is used to finance your business is the focus of this section.Cash flow is affected by stock options and shareholders.Loans are added to your cash.The loan payments are taken out of the cash.If you issue bonds or common stock, the issue is recorded as an influx of cash, since dividends reduce your cash.

Step 18: Put your statement of cash flows together.

The first thing to do is to start with the net income at the top.People reading the statement of cash flows can see where expenses are going in and out, so it's best to keep the three categories separate.To reach your net increase or deficiency in cash for the year, subtract and add cash as needed in each category.Add in the cash from last year.If you have any leftover from last year, add it to this year's cash or subtract it.The total cash resources are the amount of cash you have on hand.

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