Certified Public Accountants, CPAs, and business owners prepare financial statements. The primary difference is that CPA prepared financial statements are often provided to banks and financial institutions when a company applies for credit lines and other loans due to the assurance provided by the CPA. However, banks may request financial statements at a point in time other than December 31. Or, a business may end their year on a date other than December 31. Financial statements prepared as of a date other than December 31 are fiscal year financial statements.
Collect the balance sheet and income statement account information for the 12 month time period you are preparing the financial statements for. For example, if you are preparing financial statements for the fiscal year ending September 30, 2009, you would gather information for the period October 1, 2009 through September 30, 2009.
Record all balance sheet accounts. A balance sheet represents a snapshot of a company as of a specific point in time. Therefore, using the previous example of preparing financial statements for the fiscal year end of September 30, 2009, the values of all assets and liabilities would be reported as of September 30, 2009. Report the value of the company’s stock as of September 30, 2009. Record the company’s beginning retained earnings as of October 1, 2008.
Record all income earned and all expenses incurred for the period October 1, 2008 through September 30, 2009. Expenses should be itemized so the reader of the financial statements has as much detail as possible. For example, use separate expense categories for water, gas and electric instead of simply reporting all those expenses as utilities.
Calculate the fiscal year net income by subtracting the expenses from the income for the period October 1, 2008 through September 30, 2009. Report the net income on the income statement as well as the equity portion of the balance sheet. The fiscal year net income, if calculated correctly, will enable you to satisfy the balance sheet formula: Assets = Liabilities + Equity.
The fiscal year financial statement discussed above only considered financial statements prepared using the cash basis of accounting. If you are preparing fiscal year financial statements on the accrual basis of accounting, adjustments will need to be made for items such as deferred taxes and accrued expenses.
- The fiscal year financial statement discussed above only considered financial statements prepared using the cash basis of accounting. If you are preparing fiscal year financial statements on the accrual basis of accounting, adjustments will need to be made for items such as deferred taxes and accrued expenses.
Jessica Kent started writing professionally in 2002. Her articles have appeared in publications including the New York State Bar Association's "Family Law Review," "Valuation Strategies" and "Metropolitan Corporate Counsel." Through her writing, she strives to assist people in making informed financial decisions. She is a Certified Public Accountant in New York. Kent holds a Bachelor of Science in accounting from Binghamton University.