How do you perform final accounts performance evaluation in corporate accounting?

1 Step 1: Prepare the income statement

The income statement summarizes the revenues and expenses of a company for a specific period, usually a year or a quarter. It shows the net income or loss, which is the difference between the total revenues and the total expenses. To prepare the income statement, you need to gather the information from the general ledger, adjust for any accruals or deferrals, and classify the revenues and expenses into operating and non-operating categories. You also need to account for any taxes, interest, and extraordinary items.

2 Step 2: Prepare the balance sheet

The balance sheet reports the assets, liabilities, and equity of a company at a specific date, usually the end of the period. It shows the financial position and solvency of a company, as well as the sources and uses of funds. To prepare the balance sheet, you need to list the current and non-current assets, current and non-current liabilities, and equity accounts. You also need to ensure that the balance sheet balances, meaning that the total assets equal the total liabilities and equity.

3 Step 3: Prepare the cash flow statement

The cash flow statement shows the inflows and outflows of cash from operating, investing, and financing activities of a company for a specific period. It shows the liquidity and cash generation of a company, as well as the changes in cash and cash equivalents. To prepare the cash flow statement, you need to use either the direct or the indirect method. The direct method starts with the cash receipts and payments from each activity, while the indirect method starts with the net income and adjusts for non-cash items and changes in working capital.

4 Step 4: Calculate the financial ratios

The financial ratios are numerical indicators that measure and compare various aspects of a company's financial performance and position, such as profitability, efficiency, liquidity, solvency, and market value. They help evaluate the strengths and weaknesses of a company, as well as its performance relative to its peers or industry benchmarks. To calculate the financial ratios, you need to use the data from the income statement, balance sheet, and cash flow statement, as well as the market price of the company's shares if applicable.

5 Step 5: Analyze the financial statements

The financial statement analysis is the process of interpreting and evaluating the information from the financial statements and the financial ratios. It helps identify the trends, patterns, relationships, and anomalies in a company's financial performance and position, as well as the causes and effects of these factors. To analyze the financial statements, you need to use various techniques, such as horizontal analysis, vertical analysis, common-size analysis, trend analysis, and ratio analysis.

6 Step 6: Report the findings and recommendations

The final step of the final accounts performance evaluation is to report the findings and recommendations based on the financial statement analysis. The report should summarize the main results, highlight the key issues, and suggest the possible actions or solutions. The report should also be clear, concise, and consistent, and use appropriate charts, graphs, and tables to support the arguments and conclusions.

7 Here’s what else to consider

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