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Compiling your end-of-year financial statements? Here are eight steps to get you started the right way

by , 04 December 2014
With 2014 almost over, you don't have much time left to get your business' financial statements in order.

This isn't a simple process of just printing out all your company's statements either. You have to compile them into an easy-to-use report. You need to do this for your end of year financial audit. Without it, the process will take twice as long and cost twice as much.

This collection of financial reports is called a 'Compilation report' and it can be complicated to get it all together because of how many different statements you have.

That's why I'm giving you eight easy steps you can use to create your compilation report, before the clock runs out on 2014...

 

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Complete your compilation report in eight easy steps 

 
Step # 1: Categorise each trial balance line item to the Statement of Financial Position or Statement of Comprehensive Income
 
There you basically allocate each trial balance line item to the appropriate statement. For instance, revenue will be something that reflects on your Statement of Comprehensive Income, while accounts receivable is a Balance Sheet item.
 
Step # 2: Build the Statement of Comprehensive Income
 
Your current and previous year's figures will always different and as a result the form of your statement may differ each time.
Important! Always remember that there must be a comparison between the current and previous year's figures. So the form of this statement may differ depending on the needs of your business.
And remember, a consultancy business with no inventory or cost of sales only has operating expenses.

Step # 3: Insert Cost of Sales into the Statement of Comprehensive Income
 
Insert the total amount of money you brought in from sales or services on the top of the Statement of Comprehensive Income.
 
Step # 4: Insert the Cost of Sales amount
 
To work out your cost of sales, add your opening inventory and purchases. Then subtract your ending inventory.
 
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Step # 5: Insert the expenses
 
Operating expenses are expenses that go toward supporting your company's operations for a given period, e.g. insurance, rent, salaries and depreciation. 
 
Depreciation is also part of operating expenses. It accounts for the wear and tear on some assets, like machinery used over the long term. Companies spread the cost of these assets over the periods they use them. This is depreciation or amortisation. 
 
Step # 6: Insert the interest expenses into the Statement of Comprehensive Income at the Finance cost line item
 
Interest expense is the money your company pays in interest for money you borrow.
 
Step # 7: Deduct Income tax
 
Income tax for companies is currently 28%.  Make sure you stay updated each year as this percentage changes yearly when the Commissioner of Revenue reviews it.
 
Step # 8: Compile the Statement of Financial Position
 
The form of this statement may differ depending on the needs of your business. 
 
It's also important to show the previous year's figures on your Statement of Financial Position.
 
These eight steps will get you on the road to creating your compilation report quickly and easily. 
 
But don't stop there! There are 11 more steps you can take to finish your report in record time and you'll find them in the Practical Accountancy Loose Leaf Service
 


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