How to Prepare Annual Report of a Company
Before you start writing an annual report, determine what range of your company's financial year the financial report is meant to cover.3 min read
2. Prepare the Balance Sheet
3. Prepare the Income Statement
4. Prepare the Cash Flow Statement
Updated November 5, 2020:
Steps for how to prepare annual report of a company are as follows:
- Prepare to write
- Prepare the balance sheet
- Prepare the income statement
- Prepare the cash flow statement
Prepare to Write
Before you start writing an annual report, determine what range of your company's financial year the financial report is meant to cover. Typically, financial reports are presented quarterly and yearly. To define the time range your financial report should cover, check the governing records of your company, such as its:
- Corporate charter
- Articles of incorporation
Such documents can help indicate how often the financial report should be made.
If you're an executive of the organization, think of when a financial report would be of the most use to the organization and make that your date for financial reports. Then, you should make sure your ledger's information is updated and accurately recorded. Your financial report will be useless unless the accounting information it contains is accurate.
For your financial report, ensure:
- All inventory records are accurate.
- Accounts receivable and payable have been processed and recorded.
- Bank reconciliations are completed.
Liabilities that aren't on record at the date of the financial report should also be considered. For instance, has your company received services that didn't get invoiced? Does the company owe salaries? Such items are categorized as accrued liabilities and must be included in the financial statements. Track down and gather all omitted information if your assessment of the ledgers indicates there are omitted bits of information.
In your financial report, include the following:
- The budget and how it's related to your income and expenditure. This should include only information the board considers important.
- Essential financial analysis and significant alterations.
- Setbacks and failures, as well as proposals to remedy them based on experiential lessons learned.
- Significant future overhead. This can be connected to the future financial commitments of the organization stated in the report.
- Audited financial statements (ASF).
Prepare the Balance Sheet
To prepare the balance sheet, create the balance sheet page to show:
- The assets of the company (what the company owns)
- Its liabilities (what it owes)
- Its equity accounts, such as supplementary paid-in capital for particular dates and common stock.
Title the opening page “Balance Sheet,” and spell out the name of the organization and the operational date of the balance sheet.
Give your balance sheet appropriate formatting. Typically, balance sheets place the company's assets on the left and its liabilities on the right. Optionally, others may show their assets at the top and their liabilities and equity below.
Spell out the company's assets and title that section “Assets.” Begin with the company's current assets, such as cash and other items that can readily be converted into cash in a year from the date on the balance sheet. Conclude this section with a subtotal of the current assets.
Next, itemize the noncurrent assets, which are the assets that are not cash and won't be changed to cash in the near future. Items categorized as noncurrent assets may include:
- Notes receivable.
Add a subtotal to this section as well.
Prepare the Income Statement
The income statement page should show how much the business made and spent over a range of time. Title this page “Income Statement.” Then, spell out the name of the organization and the time range the income statement covers. For instance, income statements are typically drafted from January 1 to December 31 of any given year.
For the record, financial reports can be prepared monthly or quarterly, while income statements can be for a whole year.
Prepare the Cash Flow Statement
You should start the cash flow statement with a section for operating activities. This section should be titled “Cash Flow from Operating Activities,” which corresponds to the already prepared income statement. Spell out the operating activities of the company. This can include things like cash paid for inventory and cash receipts from sales. At the end of this section, provide a subtotal of these items and label it “Operating Activity Net Cash.”
Your cash flow statement page tracks the incoming and out-going of cash as the company transacts business. Title it “Cash Flow Statement.” Then, spell out the name of the organization and the time range the statement covers. Like the income statement, the cash flow statement typically covers a whole year — January 1 to December 31.
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