Under the financial reporting services we do analysis of financial statements of the businesses. Financial statements are prudent and reflect the health and performance of the company in the eyes of investors. Among these, two very important financial statements are the income statement and the balance sheet. The income statement that indirectly comes under the ambit of financial reporting services is a comprehensive summary of a business's revenues, expenses, and profits over a specific period, providing detailed information on the company's asset, liability, and equity positions to shareholders. It differs from the balance sheet in that it is very important in order to make informed and strong investment decisions, management decisions, and addressing individual shareholders' needs regarding the company's financial position and operating efficiency.
Income statement under Financial Reporting Services
Profit and loss statements are also known as income statements. Perhaps, it's the best method of knowing as much as your business has earned how much your business has spent over some particular period of time. Wind the calendar back a bit and take a look at some trends on your income statements; you can start to get a sense of just how healthy your business is from an operational perspective, and perhaps how you might be able to improve your margin of profit or flow of cash.
Balance Sheets under Financial Reporting Services
And that just gives you what you have, who you owe, and what's left over. That, by definition, at any point in time, your company's balance sheet will give you what your current assets are, what your current liabilities are, and what owner's equity, or shareholders' equity, is, if you're a corporation. That information will tell you what your company's worth at any point in time.
How to Prepare an Income Statement?
In order to prepare the income statement of your business you can take help of an expert professional who can prepare their statements for your business. There are many financial reporting service providers in the market who can make your work easy. Here is a small step by step guide to prepare the income statement which is part of accounting services. You prepare your income statements for a monthly, quarterly, or annual basis. You can do it during any period. Now, the three steps involved in its preparation are given below:
- Collect General Entries: You collect all the journal entries you have made for the period for which you have prepared the statement
- Calculate Heads of Expenditure: You calculate all your heads of expenditure and revenue and then record the sums of every head-revenue in order then expenses.
- Calculation by using Formula: Then by subtracting all your expenses from your revenues you have your net income sometimes known as the bottom line. That is the money that you keep as profit.
How to Prepare a Balance Sheet?
You can hire an expert professional to help you prepare your business's balance sheet. There are numerous financial reporting service providers on the market who can make your job easier. Here is a brief step-by-step method to prepare a balance sheet as part of accounting services.
Because revenues technically are the summation of all items that appear on your asset side of the balance sheet, you can quite easily say that you're adding up all your assets. Similarly, whereas expenses technically are the accumulation of all the items that appear on your liability side of the balance sheet, you can quite easily say that you're just adding up all of your liabilities. And if you subtract your liabilities from your assets you are then left with owner's equity, rather than net profits.
Balance Sheet Vs Income Statement
The key difference between the two concepts which comes under the financial reporting services are given below:
- Period of Time: A balance sheet represents the position of a firm at a given date. For example January 1, 2022. Income statement reports revenues and expenses of a firm over a particular period. For example January 1st-Dec 31, 2022
- Ownership vs Performance: A balance sheet represents what the firm owns at a given date. An income statement represents how a firm performed over a given period.
- Presentation: Presentation of the balance sheet, assets, liabilities, and equity. The revenues and expenses presented in an income statement.
- What They are Used For: The balance sheet is mostly used by the company to ascertain whether it has all the assets that would be used to liquidate all its liabilities. An income statement is used in determining whether a business is profitable or otherwise. This balance sheet will further allow the lenders and creditors to determine the net value of assets of an entity. It will also serve as a proof that the entity is relatively profitable enough, and it is strong enough to meet its liabilities.
Conclusion
There are two primary statements in the financial reporting of an entity which comes under the financial reporting services of the Fino Partners, and these are the income statement, and the balance sheet. But in saying the same thing when reporting the general overall stability of the firm's financial performance, for a different reason, it says that the income statement would reflect some period of profit and all stakeholders will be able to view it in terms of operational success for the company. The balance sheet gives you an idea about the overall view of the financial position of the corporation at any point of time-it would disclose asset management and funding. From the above statements, one can literally give a bird's eye view about the general status of finances in a company therefore, it forms a basis for strategic decisions and ensures transparency among the key users. Hence we can say that both are the crucial part of the business growth and therefore to prepare them properly you must opt for out financial reporting services.
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