|Key Questions and Answers for preparing Financial Statements for Quarter One (Q1) and subsequent periods|
|Significance of preparing accounts for interim periods, in this case, the first quarter period.||Accounts can be prepared at any time in the year, that’s why we are preparing accounts for M1, Q1, Q2, Y1, Y2, Y3 and Y4. The accounting methodology is the same for every period. As financial statements are usually prepared annually the purpose is to show that interim accounts can be prepared at any time during the year following the same accounting principles and rules. Financial Statements prepared in the course of the year are also Interim Financial Statements.|
|Where are we with BIS Ltd.?||We have already entered typical transactions and the adjustment for the period, prepared the trial balance and the financial statements following the trial balance for M1. For Q1 we have also entered typical transactions and the adjustments for the period. We will now use the same methodology to prepare the trial balance and financial statements for Q1.|
|What shape the company is in?||As the company is starting operations it has bought vehicles, equipment, employed personnel, pay for rent and general expenses all of which has caused a lot cash being spent in setting up the organisation, however, there are no sales as yet, only cash outflows. When sales start through a strong marketing effort cash will flow in and the financial position of the firm will improve.|
|What do we need to do?||As an overview the steps to be followed to achieve complete accounts are: i) enter recognised transactions in the Journal; ii) post these transactions to the statements in the worksheet for the period, balance sheet, income statement, cash flow statement, changes of equity statement, unadjusted and adjusted; iii) verify correctness of debit and credit entries in the worksheet for the trial balance, unadjusted and adjusted; iv) prepare final financial statements in the same worksheet by posting entries in trial balance to the income statement and income statement; v) present final financial statements in vertical format, as customarily used by firms to prepare their financial statements. Horizontal format can also be used, where needed.|
|Why do we prepare these statements? What do they mean?||Financial statements provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.
Financial statements may be used by users for different purposes:
Subscribe today and learn the fundamentals
It seems you don't have access to the exclusive content of The Course.
In order to gain access to the content of The Course you will have to register with EntreprenAble. Membership with EntreprenAble will also give you access to our interactive Business Game and Accounting Simulations.
Subscribe today and get:
- Unlimited website access to The Course
- Optimized view for Desktop, Tablet and Mobile devices
- Free 7-day, no obligation trial - normally £15
Test-drive the system for free