Glimpse of Procedure to prepare financial statements

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Lecture description

This video gives you a broad idea of how the entire process is followed right from collecting the source documents till preparing the financial statement. The series of steps begin when a transaction occurs and end with its inclusion in the financial statements.
Broadly, entire accounting cycle is completed in three easy stages :-
1st is collecting data,
2nd is recording & transferring in various books & then,
the last is finalizing them. This process is generally followed by every organisation, which helps them in making important decisions efficiently. 

Learn more from the full course

Guide to preparation of financial statements

In depth steps to prepare financial statement of a sole proprietor | Right from collecting data till analyzing it

04:46:24 of on-demand video • Updated August 2020

  • How financial statements get prepared with different stages
English [Auto] Hello friends in our previous session we have learned the classification and the goal of accounts. So for day are going to learn the steps to be followed Ribet find this statement We are born to this heaven or what you offered me on my plate. Later this month met this friend Alfred. Alfred Chodas financial statement. But people didn't understand how this financial statement has been repaired. He was very curious to know about the procedure of preventing it. And he got this question to us but then that is no quick answer for those questions. We need to follow some steps in order to get the final statements begin. RDC there are three stages. The first one is collecting data then recording and transferring them in an organized format and different accounting books. And then comes in finalizing stage. So let us see Vardis stages or two before launch in detail which will help us speed that in preparing the final statements. So the forestay just collecting data for any of the transaction that takes place. The first thing we need is a prove or an object the evidence of the transaction. We must have or documentary evidence or this document for each transaction. For example if our bodies is some goods we must have a bill or a cash memo or any kind of support being bound to be must collect all the evidence and then see if we can organize. So that was a state that is collecting data. Then comes the second stage that is recording and transferring. So the first step is from these sorts of documents collected within the court on these transactions. In the book Gardner is John in. John then when that aid and regard on the region's actions as they when the place as we know action is an exchange of things. Rebuilder card accounts. They're not equally affected in this book. It is always done twice in a chronological order. However it is difficult to locate transactions in a journal if the company is relatively big and has thousands of transactions in one article let alone the media. So these companies are dividing that journal into supplementary or subsidy Jones like bargees book sales book and cashable and set up and read your book and these subsidies Bogues the transaction belonging to one particular US are regarded separately in Indeed. So here. And when that first step of regarding and transferring. So now we want to next step that this transferring so from the Journal on legends actions are then posted in different accounts and all these group of accounts collectively are less Nejad. I legit has multiple accounts which contains all the information. This is someone who has a book of all transactions for any reference anything we need to go back to. They don't check it. So now we've moved on to next stage but we must be cautious before moving on. But the final stage as it is the last and final step. So before that the follow up transitional step so that are forebears statements give us a better. So we will check our Facebook and our bank account which remain thing suppose bank the some amount as bank charges and has not sent us any indication as we are not aware of the charges. We Nandikar they did in our books. So that would be a mismatch in that book as well as banks possible. Similarly that can be many situations that are book may not match our value of a deposit book. So to avoid these type of arrows and to rectify it a statement is prepared that is known as Bankura cancellation statement. The process of recording and transferring ends here. Hope you have understood all the processes so far. These first two stages are followed as an indigenous action takes place. But remember one that the last and final stage and we need to prepare a final statement and says we need about it for them. Let's proceed to the port deal that this is the final stage. So this is we have to follow those steps. So the Fourth Step is very important which will help us preparing a final accounts on the closing balances of the legit account would be then posted a statement that got us try and balance this trial balance. It gives us the summary of all accounts it helps in taking accuracy and the balances on the account can be found easily in this statement. So the next step is financial statements. It is a very important and crucial step as it is a very important step. We will check our books that we have maintained so far. So as a proven business man we will scrutinize all accounts and have a look on trial balance to check if we might miss any entry or any transaction. So let me go back on that account and check if there are any errors. And then if I immediately by Bosingwa was entries to nullify on neutralizing wrong entries and if certain things are missed out they are not there as I just meant and destroyed in the trial balance itself or at the end in the financial statements. So after all the arrows and rectification and all the decisions. Now let us quickly move on the last and final step of preparing final state. It consists of three parts are three statements namely creating account bad for Jeezy's sales and all trading related expenses are recorded. So from this trading account we get a gross profit which is transferred the profit loss account. So the next statement is profit loss account mad expenses and income is related to the administration selling and distribution and finance of recorded this profit and loss statement gives as in net profit for the end that can be between the last and most important of all is the balance sheet that all assets and liabilities are recorded the inside and liabilities side should give us an equal and balancing figure. Because this as a backbone or XDR for business it gives a complete picture of the health of our business and is responsible for many decisions to be made. The financial statements are used by many users to arrive on the conclusions about that business. So would this be complete our process of preparing final statements. The whole process that we have followed that is from this source document that the balance sheet is be from start to end and it can be reviewed and hence regarded as the accounting cycle. My Internet reader has already made his notes on this and the process seems to be clearer now. Hope this was easy to understand. Thank you.