The process of creating a financial statement is the core business activity for all companies. There are many types of financial statements that a company can use in reporting its business activities to the shareholders. These statements are used for the purpose of obtaining credit and other loans from the investors. There is a need to create accurate financial statements since this will help businesses get loans when they need them, repay debts, and for tax purposes.
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To start with the analysis process of your financial statement effects template, select the columns for the balance sheet, income statement, and statement of cash flows. Using the same transaction data as outlined in the balance sheet, complete the financial statement effects template as described above. This will automatically create the line drawing on the worksheet of your financial statement. The next step here is to identify the company’s category of business assets, such as fixed assets, accounts receivable, short-term financing assets, and long-term financing assets.
The third step in the process of analyzing transactions using the financial statement effects template is to determine the equity method. Here, the first column is the current balance, and the second column shows the difference between the current balance and the balance sheet date. Using the equity method is important because the equity effect will be a positive or negative number depending on whether the equity amount is increasing or decreasing. The formula to determine the equity effect is as follows: current equity x net worth of monthly income divided by current equity.
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The fourth step in the process of analyzing transactions using the financial statement affects template is to determine the gross value of the business. The best way to calculate the gross value of a business is to multiply the current assets, current liabilities, and expected future cash flows. The result will be the gross value of the business at the end of the reporting period. Analyzing transactions using the financial statement affects templates 3 involves the use of the gross value of the company at the beginning of the year and at the end of the year. This produces the effect of the net worth of the company.
The fifth step in the process of examining financial statements is to identify the effect of market trends. The use of the index is done through a mathematical process. The output of this process is the index that is used to determine the ups and downs of the index. However, analyzing transactions using the financial statement affects templates 5 requires the review of the company’s portfolio investments.
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The sixth step in the process of studying financial statements through the financial statement analysis template is the use of the equity and debt method. The equity method is done through the examination of current and long-term assets. The analysis of long-term assets requires the review of variable such as accounts receivable and inventory. The equity results from the fair value of the total assets less the total liabilities such as owner’s equity and capital lease. Using the equity method of financial evaluation requires the reviewing of the gross value of the enterprise.
The next step in examining financial statements is the comparative tables. Comparison of financial statements is done through the use of the unadjusted and adjusted data. The adjustments that are made to the financial statements affect the reported value of the enterprise. However, many accounting systems allow for only two sets of data to be presented in one financial statement. Therefore, when these two sets of data conflict, the values are adjusted. This process of adjusting values removes the subjective elements of accounting from the financial statements.
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The seventh step in the process of studying financial statements through the use of the financial statement effects template is the review of balance sheet items such as assets and liabilities. The evaluation of these items requires the review of the current and long-term debts of the business along with the current and short-term assets. Along with this, the effect of any new acquisitions is also noted. Once all the financial statements have been reviewed and the necessary adjustments have been made, the accountant will sign the financial reports and provide a report of the financial statements to the CEO, board of directors, or other general managers.
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