Are Your Financial Statements Good or Bad

Anybody or software can generate financial statements but are they good or bad? Financial statements are records of a company’s financial transactions that are compiled to provide information about the company’s resource and performance. There are three main financial statements: (i) Income Statement (ii) Balance Sheet (iii) Statement of Cash Flow

A good financial statement should have the following properties:

1. Accurate - it should include all financial transactions from all sources and the transactions should be correctly categorized in the chart of accounts.

2. Timely - it should generated in real time for purpose of impactful analysis and decision making; ideally 15 days after the period closes

3. Organized - the information should be presented in a chronological manner that makes the data easy to understand

4. Simple - each account should be detailed and simplified to eliminate any ambiguity in understanding

5. Comparability - it should be benchmarked to previous periods to provide better perspective and analysis

6. Relevance - the information disclosed in the statements should be aligned with the company's unique purpose

The ultimate goal of a financial statement is to provide information about your company’s resources and performance, and it should be serving that purpose for you. Take some time to review your financial statements and ensure that they possess the properties described above.