A financial statement plays a crucial role in reflecting the financial position and business performance of a company. It is a mandatory document that must be submitted periodically in accordance with legal regulations, assisting regulatory authorities, investors, and other stakeholders in accurately assessing the company’s operational effectiveness. So, what exactly is a financial statement? What key information should be understood when preparing a financial statement? Let’s explore the details in the article below with KMC !
What is a Financial Statement?
A financial statement is an essential tool that provides a comprehensive overview of a company’s financial position, business operations, and cash flow over a specified period. Presented in tabular form according to accounting standards, financial statements provide vital data to various stakeholders, including business owners, investors, banks, tax authorities, and regulatory agencies.
Under current regulations, all businesses, regardless of industry or economic sector, are required to prepare and present annual financial statements. For parent companies with subsidiaries, in addition to the annual financial statement, consolidated financial statements must be prepared at the end of the accounting period. Specifically, state-owned enterprises and publicly listed companies must also submit interim financial statements to ensure transparency in financial activities.
Deadline for Submitting Financial Statements
- Enterprises must complete the submission of financial statements within a maximum period of 90 days from the end of the calendar year or fiscal year, in accordance with current regulations.
- Đối với các doanh nghiệp có sự thay đổi về cơ cấu tổ chức như sáp nhập, hợp nhất hay chia tách, thời gian nộp hồ sơ quyết toán thuế được giới hạn trong vòng 45 ngày kể từ ngày có quyết định chính thức về việc thực hiện thay đổi.
What Does a Financial Statement Include?
A financial statement provides a comprehensive overview of a company’s financial position, including several key documents. These typically include tax settlement declarations for businesses and individuals, the balance sheet showing assets and liabilities, the income statement reflecting profits or losses, and others.
Each type of report serves a specific function, but they all share the common objective of ensuring transparency, accuracy, and an accurate reflection of the company’s financial status.
Balance Sheet
The balance sheet is a crucial component of the financial statement, reflecting the company’s assets, liabilities, and shareholders’ equity at a specific point in time, usually at the end of an accounting period such as a month, quarter, or year.
Assets on the balance sheet represent the economic resources owned by the company, including:
- Cash and cash equivalents
- Inventory, fixed assets
- Financial investments, receivables
- Investment property, construction in progress
- Other assets
Liabilities represent the financial obligations the company must settle, including:
- Payables to suppliers, employee wages
- Customer advances, internal business capital
- Taxes and fees payable
- Welfare funds, provisions
- Other debts
Shareholders’ equity reflects the capital that truly belongs to the company, including:
- Owner’s contributions
- Investment funds, development funds
The balance sheet helps the company assess its current financial position, providing a basis for strategic business decisions.
Income Statement
The income statement reflects the company’s operational performance over a specific accounting period. It includes key figures such as revenue, expenses, and profits, helping to evaluate the company’s financial health. Specifically, the main components of the statement include:
- Net revenue: Total revenue from sales and services after deductions.
- Gross profit: The difference between net revenue and the cost of goods sold.
- Operating profit: Profit after deducting financial expenses, selling expenses, and administrative expenses.
- Total pre-tax profit: Profit before the calculation of corporate income tax.
- Corporate income tax expense: Includes both current tax and deferred income tax.
- Net profit: The amount remaining after all costs and taxes have been deducted.
- Basic and diluted earnings per share: A metric used to evaluate financial performance for shareholders.
- Other income and expenses: Items not related to core business activities but which affect profitability.
Cash Flow Statement
The cash flow statement is a vital part of the financial statement, reflecting the changes in cash over a specified period. This statement helps the company track cash inflows and outflows, assessing liquidity and ensuring efficient financial management.
The cash flow statement consists of three main categories of activities:
- Operating activities: Cash flows from the core operations of the company.
- Investing activities: Cash flows related to the acquisition or disposal of fixed assets and investments in other projects.
- Investing activities: Cash flows related to the acquisition or disposal of fixed assets and investments in other projects.
What is the Standard Process for Preparing Financial Statements?
The process of preparing financial statements requires accuracy and attention to detail, and it necessitates strict adherence to regulations. According to the Ministry of Finance’s guidelines, the standard process for preparing financial statements includes the following steps:
Step 1: Organize accounting documents in chronological order to facilitate easier verification and reconciliation of information.
Step 2: Record economic transactions such as inventory movements, cash receipts and payments, ensuring that all supporting documents are valid and comply with accounting regulations.
Step 3: Allocate incurred expenses on a monthly or quarterly basis, including prepaid expenses, depreciation of fixed assets, etc.
Step 4: Review aggregated accounting data, including key accounts such as inventory, receivables, fixed assets, revenue, and expenses.
Step 5: Perform closing entries to ensure that accounts in groups 5 to 9 have no remaining balances at the end of the period, ensuring an accurate reflection of business operations.
Step 6: Finalize the financial statements in compliance with current regulations, complete the tax settlement, and submit the reports using tax filing software as required by the tax authorities.
The above article summarizes key information related to corporate financial statements. We hope the shared information helps you better understand what financial statements are, as well as the key aspects related to this important document.
