Importance Of Financial Statements
Anything that is about accounting will surely consist of debits and credits but it will be all of nothing if you cannot make them into financial statements. The first piece of data needed to construct these statements is account balances for all assets, liabilities and also owner's equity. The equity of the owner will comprise of revenue and expense accounts that will be very important in making these financial statements. The financial statements will be easy, you can be able to construct them by using the general entries that comprise of trial balance, income statement and also the retained earnings, you will also need the balance sheet for this one.
The basic statement you will need to take care of is the trial balance. All of the Bookkeeping Petaluma statements will be built the accounts in the general journal. The trial balance statement is constructed for one purpose and that is to help the owner see the debits and credits he or she has in a certain period of time. Make sure you have everything you need before starting the construction of the financial statement so that you will have no errors in making such statement. The professional will only list the accounts and put them in the preferred listings in the credit and debit columns. All columns will be added up and to the bottom in the trial balance and will be labeled as total. You will have a n identical and exact amount that you were expecting only if the accounting that your accountants did are correct. You will have to make sure that there were no listing balances that were on the wrong side because human errors will really deal a huge damage to a accounting endeavor.
An income statement will help a company determine the total money being spent and also earned. You will need the same thing from the trial balance, you will have to get the company name, the date of the statement and also the name of the financial statement. But you will have to do some minor changes, the date should say "for year ended month day year". Make sure that you get the details right, get the owner's equity accounts that comprises of the revenues and the expenses. List the revenue first because it will have the credit balance and following is the expenses because it will have the debit balance. The net income will be the answer you get from subtracting total revenue to total expenses. Know more here!