What are the Financial Statements of a Company

Do you want to create a plan that will lead your business to success? In this case, it will be essential that you frequently analyze your financial statements. This task will be easier if you request your bookkeeping services in Colombia.

What are financial statements?

These are reports on the financial situation and activity of a company. They can help you evaluate its performance over a period or up to a certain date.

The financial statements collect the activities related to the following fields of your company:

• Assets: The part of your business that is under your control. It is everything you own.
• Liabilities: What you owe to your suppliers and other creditors.
• Capital: The possessions of the company that have originated from contributions from partners and profits from past periods.
• Income: Resources generated by business activities.
• Expenses: The disbursements that are caused to sustain the operation of the company.
• Cash Flow: The movement of cash. If you have enough cash flow, it is a sign that your business is not having problems operating.

What are the main financial statements?

Now we invite you to learn about financial statements and their usefulness in the business world.

• Balance sheet: This report helps you determine the financial situation of your business on a given date. You will compare your assets in relation to your liabilities. It is ideal to project the status of your finances in the future.
• Statement of income: It helps you measure the profits and losses derived from the operation of your business during a period.
• Cash flow statement: It allows you to know the sources of income and the application of resources.
• Statement of changes in equity: Your capital may change depending on the new contributions decreed and the capitalization of profits. You will find this information in this document.

Aspects you should consider when preparing the financial statements of your business

For your financial statements to be accurate and useful, it is necessary that you comply with the following aspects.

Keep accounting records up to date

The elaboration of daily policies must be current and avoid postponement. This will help the issued financial statements consider the current economic reality.

Respect the posting criteria

Although accounting experts are used, it is important that they all follow the same accounting pattern. The unification of criteria will help the information to be consistent.

Take into account financial reporting standards

When creating the accounting policies for the business, international financial reporting standards (IFRS) and local accounting standards must be followed. These rules will help you analyze the available data and classify it correctly in your accounting.

It is important to analyze IFRS when creating the chart of business accounts. It will help you unify the criteria of the accounting staff.

Use the notes to the financial statements

These elements are clarifications that you can place next to the financial statements. You may be surprised to learn that not all accountants use them. Numbers are not always enough to explain business conditions. That is why in some items it will be convenient to write down explanations that help to know the context.

For example, due to the pandemic or a war in the world, some data may not be common. It may be that the exchange rate of your foreign exchange operations has skyrocketed. It is convenient to explain the reasons by means of notes. They help to know the circumstances by which some data may be unusual.

Collaboration with accounting experts is essential for your financial statements to be accurate. Learn about the best accounting services in Colombia. Generate useful information to make better decisions.