Businesses rely on various tools and methodologies to prepare accurate financial statements at the end of a specific period, such as a quarter or fiscal year. These tools, including accounting data worksheets, mainframe computers and financial analysis software, help top leadership lay the groundwork for accurate and law-abiding financial reporting.
Financial statements catalog a company’s operating performance, putting it into context based on the state of the economy, rivals’ moves and the regulatory environment. A complete set of accounting data summaries includes a statement of financial position, a statement of profit and loss, a statement of shareholders’ equity and a statement of cash flows. A statement of financial position is also called a balance sheet or statement of financial condition. The preparation of accounting reports is a collective effort that requires the financial acumen and business insights of various personnel -- ranging from accountants and financial managers to cost controllers, budget supervisors and investor-relations specialists.
Preparing accounting reports through worksheets helps solve the perennial concern of financial managers: incorrect data. If a company’s leadership makes decisions based on wrong information, the business could lose money if such decisions tie the organization’s hands for the long term or involve substantial amounts of cash. To prevent erroneous financial reporting, organizations may create accounting templates and pre-populate these worksheets with specific items. Then, accountants simply need to plug in numbers for every period. For example, a company can set up a balance sheet worksheet, pre-populating the form with such items as short-tern assets, long-term assets, short-term liabilities, long-term liabilities and shareholders’ equity.
Using a worksheet to prepare a financial statement ensures data completeness. The goal is to avoid mis-reporting or non-reporting significant data investors may rely on to make decisions. A company may create a template with all financial accounts it uses to record operating activities. The business can review prior reports to determine what worked in the past, which reporting measures helped the organization publish full performance data and how to replicate the same procedures in the current reporting period. A chart of financial accounts indicates assets, equity items, revenues, expenses and debts.
Financial-statement spreadsheets enable organizations to prepare and report operating data summaries that conform to specific guidelines. These include generally accepted accounting principles, U.S. Securities and Exchange Commission requirements and international financial reporting standards. A company may embed in the worksheets the essential points of current accounting legislation, working in tandem with computer programmers to create a mechanism that will automatically incorporate regulatory developments into the spreadsheets.