How to Read Financial Statements

A step by step guide to understanding and creating financial reports. Ittleson Thomas, Press Book Mart, 1998. ….

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HOW TO READ FINANCIAL STATEMENTS
Accrual Basis Chart of Accounts Accounts Payable Accounting Period Accounts Receivable Accrued Expenses Accrued Income
WHAT FINANCIAL STATEMENTS TELL YOU
MODIFYING YOUR CHART OF ACCOUNTS
ACCOUNTS PAYABLE AND RECEIVABLE
INCOME AND EXPENSE ACCOUNTS AND CASH FLOW STATEMENTS
STRAIGHT­LINE & OTHER DEPRECIATION
READING FINANCIAL STATEMENTS – TEN TIPS TO REMEMBER

  1. Chart of Accounts are flexible and efficient allowing new accounts to be added to answer your financial monitoring questions and meet your reporting needs.
  2. Your Accounts Payable and Accounts Receivable reports are significant financial documents that frame your day­to­day operational decisions and other short­ or long­term, decision­making strategies.
  3. Income or Revenue Statements show how much funds were received by the CDC from all of your sources of income-Funders, sales of services or publications, bank interest, membership and other miscellaneous income streams-over a period of time.
  4. The Cash Flow Statement tells the story of monies exchanged between your CDC and entities outside of your organization over a period of time. It includes income and expenses.
  5. The Balance Sheet tells a story of your CDC and its operations and is the picture that is closely examined by the bank if you should ever need a loan.
  6. The Board of Directors has fiduciary responsibility for the CDC and must be able to read and understand financial statements.
  7. Include your Auditor in significant Board meetings and use them for training the Board of Directors.
  8. Since computerized systems fail and system crashes are known entities your Accounts Receivable, Accounts Payable, General Journal Entries, and Financial Statements should be printed on a monthly basis.
  9. Keep your records and statements simple so that they can be read, understood and interpreted.
  10. Learning takes time, be patient with yourself.
Download How to Read Financial Statements pdf from www.ncced.org, 8 pages, 212.73KB.