Annual accounts

Financial statements. I'm sure you've heard of that a few times.

Something everyone has to do. But like the bookkeeping of attachments, it is very similar to a time-waster when you would rather spend time with colleagues and customers. It's always quickest to be lazy. That's why the fastest give us the task when the financial statements are to be made.

If you are not sure what the different elements contain or why they are important, then we have a slightly long text below. Unless you trust us enough already for us to talk now.

"Adult explanation"

The execution of financial statements is mandatory. At Sandgrav Solutions, we offer help with financial statements. As finance manager, it is a recurring event to collect and present data to an associated auditor. It is a task we would like to take on, so you can enter the new year with an overview and realistic plans for your business development. All we need is your data and attachments, and we'll put things in a system for you. The result is an electronic company that you can send to your accountant for approval. Read below what a financial statement really is and also how you can interpret information that is given in a financial statement yourself. The annual accounts consist of two parts: report and financial statements. The report describes the year's development in the company and provides an indication of what the future will bring. The accounts are composed of profit and loss account, balance sheet and an inventory of the Company's cash flows.

The profit and loss account reports on income and expenses in the most recent financial year, while the balance sheet tells about the company's values and the company's debts. The cash flow statement shows how much money the company actually has in its coffers.

Here you will get an introduction to the most important items in the financial statements.

Income statement

The profit and loss account is the company's statement of income and expenses. By looking at the gross profit (also called the margin), you can see what is left of the company's revenue when the variable costs (also called production costs) are deducted.

However, it is important to look further down the list of costs. The primary result (also called ebit – Earnings Before Interest and Taxes) is an interesting result that shows profits before interest and tax. The primary operating result gives an idea of how well the company has on its spending on research, distribution and administration.

The ordinary result is the profit before tax. In relation to the primary result, interest costs and interest income are deducted here. The costs may be due to interest on loans for the purchase of, for example, machines, while income may be due to returns on securities in which the company has chosen to place some of its liquid assets.

The group result is the bottom line of the company's financial statements – that is, the profits. It is important to look at whether profits have developed in a positive direction over the past five years – or whether the company has had trouble creating better results year after year.

Balance

The balance sheet is a snapshot of the company's financial situation on the day the financial statements are prepared. The balance sheet shows the relationship between the assets – machines, inventory, bankroll – and liabilities – equity, debt, tax.

Assets

The assets are the company's values and are divided into two groups: fixed assets and current assets.

Fixed assets consist of those values that cannot be easily converted into money if the company needs ready money. These are, for example, the company's buildings, machines and furniture. Goodwill is also a fixed asset. Goodwill is non-physical assets. For example, it is the company's trademark that is perhaps well known to everyone and therefore worth a lot of money because it creates recognition and has a value to the consumer.

Current assets consist of the values that can be easily converted into cash. These are, for example, the cash balance, the inventory, the receivables of customers who have not yet paid for delivered goods, and securities.

When looking at the assets, you should especially keep an eye on the inventory and receivables. Inventory should preferably not increase more than turnover, as this may be a sign that the company is having difficulty controlling production. Nor should receivables increase radically from one year to the next, but it is not in itself a problem to have money for the benefit of your customers. A long credit period may be what causes the customer to place large orders with the company, but conversely, there is a certain risk that the company will not get its money.

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Frederik Sandgrav

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