A financial report should be prepared.

A financial statement consists of a balance sheet, an income statement, a statement of retained earnings, and a cash flow statement.The documents communicate a company's performance over a period of time.Private companies may need to give financial reports to banks.The SEC requires publicly-traded corporations in the US to submit audited financial reports.If you're a small business owner, you can prepare your own financial reports.If your business is large, you should hire an accountant. Step 1: For the period covered by your report, list your income. List your organization's name and period on your income statement.The total amount of income the organization made during the period should be entered.If you sell both goods and services, you may want to include income for each separately.The gross revenue the organization has earned should be listed.Expenses will be deducted to find the organization's net income later on. Step 2: You can determine the cost of goods or services. Total the costs associated with the goods or services you sold, including labor, materials, and overhead expenses.The cost of goods in a retail business is usually the cost to purchase the items for your inventory.The costs in the service sector include labor and supplies. Step 3: Take your gross profit and divide it by the number of people. The income statement shows your gross profit minus the direct cost of goods or services you sold.List the amount in the line below the cost as "gross profit" after you've made the calculation.If you had $20,000 in revenue and $5,000 in costs, your gross profit would be $15,000.If you want to stand out from the other information, you should make the gross profit label and amount bold.If it is a positive number, list the gross profit in green.For a negative number, use red.Instead of using fractions or decimals, round your numbers to the nearest whole number. Step 4: Provide an itemized list of expenses. Employee wages, rent or mortgage payment, office supplies, transportation expenses, and marketing are common operating expenses.To keep your income statement simple, organize your expenses into categories.Equipment depreciation is included in your organization's expenses.If you want to figure out the amount of depreciation for the period covered by your income statement, the tax departments have depreciation tables.Tools are included in accounting software to help calculate depreciation. Step 5: Subtract your expenses from your gross profit. Under the list of expenses, total all of the expenses you listed and enter that amount.If you make this text bold, it will stand out from the list of expenses.If you're making a full-color income statement, change the color to red.Subtract that amount from your gross profit.The net profit for the period covered by the income statement is the result of this equation.Make the text bold so that it stands out.If you're making a full-color income statement, you can change the amount to green or red if it's a positive number. Step 6: Determine the retained earnings balance Retained earnings is the amount of money the company has not distributed to equity partners or shareholders.The organization starts with this amount accumulating.The retained earnings balance is on the first line of the statement.The organization's previous financial statement can be used to find this amount.Retained earnings will likely be zero if this is your organization's first financial statement.The retained earnings balance will be zero if your organization distributes all income to shareholders.The balance may be a negative number if the organization has a deficit or is in the red. Step 7: The net income should be listed on your income statement. The net income you calculated on your income statement for the same period can be found below the current retained earnings balance.If your organization didn't produce a net profit, this may be a negative number.If you change the color of the Statement of Retained Earnings, it will show green and red.Place parentheses around the amount to show that the statement is negative. Step 8: If income is distributed to shareholders, subtract it. Retained income doesn't count if the net income was distributed to shareholders or partners.If no income was given, the entire amount of net income would be added to the retained earnings.The amount of income distributed to shareholders or equity partners should be listed on your statement.The amount is subtracted from the net income if you put it in parentheses or red.Suppose your company had a net income of $20,000 for the period covered by your financial report.$10,000 was given to your company's equity partners.Your company retained $10,000 in earnings. Step 9: The amount of retained earnings should be calculated. Add the remaining net income for the period to the total retained earnings balance after you subtract the amount of income you distributed to shareholders or equity partners.You should report this amount on the last line of your Statement of Retained Earnings.For example, if your company had $300,000 in retained earnings and you retained $10,000 of the net income earned over the period covered by your financial report, you would now have $310,000 in Retained Earnings. Step 10: The page should be formatted into two columns. Balance sheets give a snapshot of your organization's assets on one side of the page and its liabilities and equity on the other.It's easier to see the balance when the assets and liabilities are side by side.You don't have to use more than one page if you use two columns.At the top of the page, across both columns, label the sheet as a "Balance Sheet" with the name of your organization and the dates for the period the balance sheet covers.It is possible that your word-processing or spreadsheet program has a balance sheet template. Step 11: Assets are listed in the left column. Any organization's assets are an asset.Current assets, fixed assets and investments are the types of assets that are classified.There is a category for intangible assets on the balance sheet.Current assets include cash, accounts receivable, inventory, and supplies.Real estate, equipment, and anything else that can be used for more than a year are fixed assets.The value is easy to determine for current assets.You may need to check the organization's last tax return to find a value for fixed assets.Depreciation lowers the value of fixed assets. Step 12: Liabilities and equity should be placed in the right column. Liabilities are divided into current and fixed.The owners have equity in the organization.Current liabilities include accounts payable, short-term loans, and business credit accounts.Mortgages, long-term loans, or employee pension plans can't be fixed in a year.To calculate the owner's equity, you'll need to know how much they've contributed in capital, as well as the amount of earnings retained by the company.This information can be found in your Income Statement and Statement of Retained Earnings. Step 13: Balance the books with total assets and liabilities. The total value of assets and liabilities should be the same when you complete your balance sheets.If the two don't balance, look over the values you've entered to find a mistake.Review the values you used for the owner's equity.The owner's equity should always be the same as the total value of assets and liabilities.The owner's equity may need to be adjusted if your totals don't balance. Step 14: Determine the organization's cash balance at the end of the previous period. The Statement of Cash Flows starts with your cash balance at the beginning of the period covered by your financial report.On the first line of your statement, enter this amount.You can get this number from the previous financial report.If this is the first financial report for the organization, you'll have to calculate the starting cash by taking the cash on hand and dividing it by the number of employees.Anything that can be converted to cash in less than a year is known as "cash equivalents".Savings accounts, money market funds, and similar accounts are considered to be cash equivalents. Step 15: You can list the net income on your income statement. Find the amount of net profit your organization made during the period covered by your financial report by going back to your income statement.Below your cash balance, list this amount.For the purposes of your Statement of Cash Flows, it doesn't matter how much of the net income was distributed to shareholders or equity partners. Step 16: Pick out 3 categories for your cash flows. All of the cash flows reported in your statement fall into 3 broad categories: operating activities, investing activities and financing activities.Specific cash flows can be listed in each category.Most organizations adjust the net income based on changes to the accounts represented by each of the categories.Depreciation of assets, accounts payable, and accounts receivable are included in operating activities. Step 17: The cash provided by operating activities can be found by adjusting the net income. If the organization has equipment that will be used for more than a year, the depreciation in those assets is added back to the cash balance.The balance of your accounts receivable and accounts payable should be subtracted from your cash balance.Net cash provided to your organization is the result of operating activities.Regardless of whether or not money has been exchanged hands, add any amount that occurred during the period covered by your financial report in your accounts receivable and accounts payable.You might need to adjust your income for other accounts, such as taxes or payroll.Your cash balance would be the same as the accounts payable balance was if you owe taxes or payroll. Step 18: The same process is used for investment and financing activities. Purchases are subtracted from your cash balance, while sales are added to it.To arrive at your net cash provided by investment activities and financing activities, you need to list these items individually.If you want to show a loss or deficit for the period covered by your financial report, place the amount in parentheses or change the color of the report to red.If your net cash is a deficit, type "used for" rather than " provided by."If your net cash from financing activities is a loss, you would label it "net cash used for finance activities." Step 19: The cash should be calculated at the end of the period. Take the net cash numbers for each category and add or subtract them from the organization's cash balance at the beginning of the term covered by the report.Your organization's new cash balance is the result of this calculation.You can compare your Statement of Cash Flows to your Income Statement.You may want to figure out why the net cash flow generated is different from the profits reported.If your organization is relatively new and requires large capital investments, those investments wouldn't appear on your Income Statement all at once.

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