Financial Statements

Financial Statements for Companies

The process of undertaking business accounting is to give businesses a real insight into the operation and performance of their business. From annual financial report preparation to board packs and real-time key performance indicators, the Westcourt business accountant team provides meaningful information about their business performance to families who own businesses and other users of the business financial reports.

At Westcourt, the business accounting process needs to be tailored to your end needs – ranging from a yearly process for micro/small operators. It requires the accounts to show the ATO to larger organisations that need a business accounting process to let them know what is going on.

Our commitment to business accounting through the preparation of cash flow statements, profit and loss reports, and balance sheets – tailored for the end-user makes our business accounting and financial statement preparation process fit for purpose. For many families in business, we prepare the same set of financial statements differently for different users – the AGM will often contain reduced accounts. The ATO reports will typically be quite detailed, including a reconciliation of accounting income to the operating profit. The management reports will often be very high level, so management can pinpoint areas of focus that need a deep dive.

Our tailored, collaborative approach to accounting for businesses means that we will actively work with your team to get the best result for your family and your family business. In most instances, our clients will engage their full-time financial controller, office manager, bookkeeper or CFO, who is typically responsible for data entry and management reports. And our collaborative approach to business accounting means that we will be engaged to support and review your current team – not work against them.

The advent of cloud accounting has made our role significantly easier in supporting the business accounting process for our client’s finance teams. The ability to access the cloud software programs for our clients, drill-down and provide quick answers have helped us simplify many processes for our clients that previously took a significant amount of time – and because we don’t keep timesheets. We are happy to take client calls that we can fix “on the spot” rather than drag out the business accounting process into a long-winded saga. We want to simplify the business accounting work to focus on what accountants are good at – generating value and insight to change future business decisions positively.

At Westcourt, we have specialist business accountants on hand with post-graduate qualifications to support our knowledge. Our commitment to only providing advice to families in business, a Xero Gold Champion practice and a deep global accounting network mean that we are a natural choice for preparing financial reports and business accounts – so why not call us today.

Frequently Asked Questions

What are the basic elements of financial statements?

Financial statements are a set of reports that provide information about a company’s financial performance and position. The basic elements of financial statements include:

Assets: Assets are resources that a company owns or controls with the expectation of future economic benefit. Examples of assets include cash, accounts receivable, investments, property, plant, and equipment.
Liabilities: Liabilities are obligations that a company owes to others, such as loans, accounts payable, and taxes owed.
Equity: Equity represents the residual interest in the assets of a company after deducting liabilities. Examples of equity include common stock, retained earnings, and reserves.
Revenues: Revenues are inflows of economic resources that result from the sale of goods or services.
Expenses: Expenses are outflows of economic resources incurred in the process of generating revenue.
Gains and losses: Gains and losses represent increases or decreases in equity that result from transactions and events outside of the company’s normal operations.

These elements form the basis for the preparation of three main financial statements: the balance sheet, the income statement, and the statement of cash flows.

The balance sheet provides a snapshot of a company’s financial position at a specific point in time, showing its assets, liabilities, and equity. The income statement provides information on a company’s financial performance over a specific period of time, showing its revenues, expenses, and net income. The statement of cash flows provides information on a company’s inflows and outflows of cash, including cash from operating activities, investing activities, and financing activities.

It’s important to understand the basic elements of financial statements to be able to interpret and analyse a company’s financial performance and position.

Who needs to prepare financial statements?

In Australia, different entities are required to prepare financial statements based on their legal structure, size, and type of activities. Here are some examples:

Companies: All companies registered in Australia, regardless of size, are required to prepare annual financial statements.

Self-managed superannuation funds (SMSFs): SMSFs are required to prepare annual financial statements and have them audited by an approved SMSF auditor. The financial statements must be prepared in accordance with the Australian Accounting Standards and include a balance sheet, statement of changes in equity, income statement, and cash flow statement.

Not-for-profit organizations: Not-for-profit organizations are required to prepare annual financial statements in accordance with Australian Accounting Standards and submit them to the Australian Charities and Not-for-profits Commission (ACNC). The financial statements must include a statement of financial position, statement of financial performance, and cash flow statement.

Partnerships and sole traders: Partnerships and sole traders are not required to prepare financial statements under Australian law. However, they are required to keep accurate financial records to calculate their income tax liabilities.

Overall, the requirements for preparing financial statements in Australia vary depending on the type of entity and its activities. Financial statements can also be required under trust law, banking covenants, control of monies and cashflows or investor reporting. It is important for organizations to comply with the relevant laws and regulations to ensure they meet their reporting obligations and provide accurate and transparent financial information to stakeholders.

What is the most important part of financial statements?

The most important part of financial statements can vary depending on the perspective of the user of the financial statements. However, there are several key components of financial statements that are generally considered to be the most important:

Income statement: The income statement, also known as the profit and loss statement, shows a company’s revenues and expenses over a specific period of time. It is an important part of financial statements because it shows whether a company is profitable or not. Investors and analysts often focus on a company’s income statement to evaluate its financial performance.

Balance sheet: The balance sheet shows a company’s assets, liabilities, and equity at a specific point in time. It is an important part of financial statements because it provides an overview of a company’s financial position. Lenders and investors often look at a company’s balance sheet to assess its financial health and ability to repay debts.

Cash flow statement: The cash flow statement shows a company’s cash inflows and outflows over a specific period of time. It is an important part of financial statements because it shows how a company generates and uses cash. Investors and analysts often use the cash flow statement to assess a company’s liquidity and ability to fund its operations.

Overall, each part of a financial statement serves a different purpose and provides important information to different users. However, the income statement, balance sheet, and cash flow statement are generally considered to be the most important components of financial statements.

When does the government require that I prepare financial statements

In Australia, the Australian government requires different entities to prepare financial statements based on their legal structure, size, and type of activities. Here are some examples:

Companies: All companies registered in Australia, regardless of size, are required to prepare annual financial statements Companies of a certain size must also submit their financial statements to the Australian Securities and Investments Commission (ASIC) and comply with other reporting requirements.

Other entities: Other entities, such as government agencies, partnerships, and sole traders, may have reporting requirements based on their specific circumstances and activities. These requirements may be set by the Australian Taxation Office (ATO), other regulatory bodies, or industry associations.

Overall, the requirements for preparing financial statements in Australia can vary depending on the type of entity and its activities. It is important for organizations to comply with the relevant laws and regulations to ensure they meet their reporting obligations and provide accurate and transparent financial information to stakeholders.

When can the government request I produce financial statements?

In Australia, several government bodies can ask businesses to produce financial information, including:

Australian Taxation Office (ATO): The ATO is responsible for collecting taxes and administering the tax system in Australia. As part of its compliance activities, the ATO may request businesses to provide financial information, such as tax returns, financial statements, and transaction records, to verify their tax liabilities and compliance with tax laws.

Australian Securities and Investments Commission (ASIC): ASIC is responsible for regulating companies, financial markets, and financial services in Australia. ASIC may request businesses to provide financial information, such as financial statements, to ensure compliance with the Corporations Act 2001 and other regulatory requirements.

Australian Competition and Consumer Commission (ACCC): The ACCC is responsible for enforcing competition and consumer protection laws in Australia. The ACCC may request businesses to provide financial information, such as financial statements and transaction records, to investigate alleged anti-competitive behavior or unfair business practices.

Australian Charities and Not-for-profits Commission (ACNC): The ACNC is responsible for regulating charities and not-for-profit organizations in Australia. The ACNC may request these organizations to provide financial information, such as financial statements and activity reports, to ensure compliance with the ACNC Act 2012 and other regulatory requirements.

Overall, these government bodies have the power to request financial information from businesses to ensure compliance with relevant laws and regulations and to protect the interests of stakeholders such as taxpayers, consumers, investors, and donors. There is also state-based agencies like RevenueWA or The Builders Registration Board that Westcourt has experience in managing.