How to Fill Out a Horizontal Financial Statement
The three main financial statements are the income statement, balance sheet and statement of cash flows. Companies prepare these statements at the end of an accounting period, which is usually a quarter or a year. The horizontal financial statement format is different from the regular statement formats because the objectives of the two formats are different. The regular format is a financial summary for a specific period. You can use the horizontal format to assess the effect of each transaction on the three main financial statements.
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Instructions
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Format the horizontal financial statement. Set aside column one for financial transactions. Reserve the subsequent columns for the balance sheet, income statement and the statement of cash flows. If you are using a software spreadsheet application, set aside sufficient columns for the financial statements and rows for the transactions.
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Subdivide the financial statements into their respective components. For example, divide the balance sheet columns into assets, liabilities and stockholders' equity. Depending on the complexity of your business, further subdivide the assets section into current and fixed assets, the liabilities into current and long-term liabilities, and the stockholders' equity section into common stock and retained earnings. The income statement should have three columns -- sales, expenses and net income. Divide the statement of cash flows into two columns, one for the cash inflows and outflows and the other for explanatory notes or symbols.
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Record the transactions. The first row after the column headings should be the beginning balance. The second to the penultimate rows should contain the various transactions during the period, such as sales, rent payment and purchase of raw materials. The totals for the period should be the last row of the horizontal financial statement.
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Fill in the horizontal financial statement columns for each transaction. Starting from the balance sheet and going across to the statement of cash flows, fill in the columns. Use "NA" to indicate non-applicability because only a few cells will apply to each transaction. If necessary, use symbols or numerals in the table to link to explanatory notes at the end of the financial statement.
For example, if you sell a product for $100 in cash, enter this amount in the current assets and retained earnings columns in the balance sheet, the sales and net income columns in the income statement and in the statement of cash flows column. Write "OA" next to this entry to indicate operating activities. Note the effect of this sales transaction on each of your financial statements simultaneously. If you are using a software spreadsheet, you should be able to see the totals updating automatically.
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Compute the totals at the end of the period. For the balance sheet, assets should be equal to liabilities plus shareholders' equity. Check to see that you have entered all the transactions and in the right columns. Finally, check your math, especially if you are preparing the statements manually.
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