How to Ensure Accuracy on Financial Statements
The financial statements of the company include the statement of sale, balance sheet, and statement of cash flow. The annual statement summarizes sales, expenses, and benefits for a calendar year. The balance sheet includes assets, debt & equity of lenders, and summarizes capital inflows and outflows in the statement of cash flow. Precise financial statements are relevant because the financial stability and performance appraisal of businesses rely on accurate and detailed reports from management, analysts, creditors, and external auditors. Accuracy begins with newspaper inscriptions and ends with the CEO who certifies that the news is accurate.
Ensure the quality of the method of data entry, which entails financial transaction journal entries and the uploading of journal entries to the ledger. If the data entry experts make math mistakes or insert the data into the incorrect records, it will not be identified by such an advanced accounting kit. Preparation and random testing are the two approaches to ensure quality compliance for data entrance procedures. According to the Northern Nevada Business Weekly report, an accountant called Mike Bosma who is also a certified business accountant advises that the clerk who is responsible for the data entry must be provided with a written map of the business’s finances for guideline purposes in November 2k10, to enter the data into the right records.
Compare your accounts with external records such as bank records, supplier invoices, credit card details, etc. The figures ought to correspond. For eg, your balance sheet cash could fit your bank statement’s final balance. Likewise, the long-term debt balance should be equal to the cumulative mortgage balances and other long-term credit papers.
Check for apparent mistakes in balance sheets. A recommendation on its website warns small firms, for example, the negative cash balance, which they should search for apparent errors. It is advised to search the financial statements of the Illinois Small Business Crew Center in the State University for suspected errors. The cost of merchandise delivered need not be the same every month, as your sales will vary each month. There should be a depreciation costs entry if you have fixed assets. Check that you make the correction entries for accumulated but pending bills, such as interest and salary costs.
Check that the non-cash costs in the cash flows statement have been changed. The discrepancy between the past and present periods of the net cash balance should correspond with the adjustment in your bank statement if your company accounts receive loans.
If you find irregularities, please follow up with the bookkeeper, sales manager, or warehouse manager. For instance, too many outdated or expired products may result in an increased financial statement. A high return may mean that your manufacturing plant or the plant of your provider has a product testing problem.
Reviewing Accounts Receivable Process
The very first step in inspecting the accounting process of a business is to look at the original information. Auditors typically draw customers or customers from the receivables directory of a business to check the original facts which contributed to the current balance. This is a major move since a corporation can potentially establish false account balance sheets by merely supplementing its financial statements by adding bogus customers and receivables. The auditors can be seen by examining the initial revenue records that sales happened on account to establish the balance of the receipts.
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