How to Create an Annual Financial Report
- 1). Gather all support documents. This includes proof of all assets, liabilities, expenditures, revenues and cash flow for the year. Use the same line items as used on monthly reports to maintain consistency in accounting structure.
- 2). Create an income statement. The income statement is comprised of revenues, cost of sales, other expenses and net income. Gross profit is revenues minus costs of good sold; net income is gross profit minus all other expenses. Total the monthly expenditures and revenue and enter them into the appropriate categories. The larger the organization, the more line items the income statement will have.
- 3). Create a balance sheet. Unlike an income statement, the balance sheet shows the status of assets and liabilities at one point in time. The balance sheet equation is assets equals liabilities plus stockholders' equity; that is, assets are listed at the top of the balance sheet (in order of liquidity) and liabilities and stockholders' equity are listed below and used to explain how those assets were paid for.
- 4). Create a cash flow statement. Not all organizations publish a cash flow statement. It is primarily used to show the flow of cash and use of funds for organizations which use accrual-based accounting. The first section is cash flow from operations, the second is cash flow from investing and the third is cash flow from financing activities.
- 5). Include notes to explain all assumptions made in the financial reports and have management provide a summary of operations. The summary should provide a narrative to the financial statements.
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