How to prepare a financial statement
Using accounting software can be the simplest way to generate financial statements.QuickBooks Onlinealso gives you access toQuickBooks Live Expert Assisted who can answer your questions about financial statements and your underlying bookkeeping.* If you're preparing financial statements manually, visit our articles about thebalance sheet,income statement, andcash flow statementfor preparation details.
Each type of financial statement requires different information to prepare, but they're created using the same three accounting principles. Because financial statements serve as fundamental sources of financial information, you need to apply basic accounting principles to ensure accuracy and consistency.
1. Recorded facts
An original or historical cost of accounts can help you prepare financial statements. Typically, you record prices and assets you purchase at different times at the original cost.
2. Accounting conventions
Usingaccountingconventions makes your financial statements comparable and realistic. For example, the principle of consistency requires accountants to apply standards consistently year after year.
3. Personal judgments
Your financial statements are based on personal judgments and estimates to avoid overstatingassets and liabilities.
You can maintain accurate financial statements by choosing your accounting conventions and sticking to them over time. Ultimately, the best way to create an accurate, dependable financial statement is to automate the process wherever possible. Using accounting software, for example, leverages technology to handle all the number crunching and avoid manualaccounting errors.
