Understanding Financial Position Reports, Types, and How to Make Them

The financial position report is the main key to understanding how healthy your company's finances are.

According to research, companies that routinely analyze and understand their financial position reports tend to be more successful in making the right financial decisions.

However, before you can take full advantage of it, it is important to understand what a financial position report is and how to interpret it.

In this article, let's learn in depth the basic concepts of a financial position report. Starting from the definition of a financial position report, its types, and its importance in a business context.

Definition of Financial Position Report

A company's financial position report (statements of financial position) or what is often referred to as a balance sheet is a report that records all assets, liabilities, and equity of a company at a certain time. Usually at the end of an accounting period such as the end of the month or the end of the year.

• Assets: are all valuables owned by the company, such as cash, buildings, vehicles, or even copyrights.
• Liabilities: all debts or money that the company must pay to others.
• Shareholders’ equity: the claim on the company’s assets that remain after all debts have been paid.

The financial position statement is very important because it provides a clear picture of the company’s financial condition at a given point in time.

This statement can help investors, creditors, and management understand the company’s financial health.

As a result, they can make informed decisions regarding investments or loans.

By understanding the financial position statement, you can see whether the company is financially stable and healthy or not.

Types of Financial Position Statements

The financial position statement is actually a way to show how healthy a company’s finances are at a given point in time.

There are two types of financial position statements that are commonly used, namely the balance sheet and the staffel balance sheet.

Although both have the same purpose, the formats are different.

It is important to know which type of report is right for your company.

That way, you can create a financial position statement that is easy to understand and useful for everyone involved in your business.

Skontro Type

A skontro balance sheet is a type of financial report that divides information between what the company owns (assets) and what the company must pay (liabilities).

When creating a report in skontro form, you must divide the report into two parts.

The right side is to show capital and liabilities. Then on the left side to show what the company owns, such as cash, inventory, and property.

Staffel Type

A staffel balance sheet is a financial report that is arranged in a long downward manner.

In this report, all information about the company's assets, liabilities, and equity is written sequentially from top to bottom.

Information about what the company owns (assets), what the company must pay (liabilities), and what is left after paying all debts (equity) is included in the table.

This type of balance sheet is suitable for large companies with many accounts.

An example of a staffel balance sheet will display all accounts in the column on the left, while the amount of money will be written on the right.

Financial Position Report Format

The financial position report follows the basic format of the accounting equation, namely Assets = Liabilities + Equity.

This means that in this report, information about the company's assets is always written first before liabilities and equity.

Assets

The company has various assets that can be used to generate income. These assets are divided into two categories, namely Current Assets and Non-Current Assets.

Current Assets include everything that can be immediately converted into cash or spent within one year, such as cash, receivables, and inventory.

Meanwhile, Non-Current Assets are assets that are used for more than one year, such as property, equipment, and investments.

Liabilities

On the other hand, the company also has obligations that must be met. These obligations include all debts that must be paid by the company.

Similar to assets, liabilities are also divided into two main categories, namely Current Liabilities and Long-Term Liabilities.

Current Liabilities include debts that are due in less than one year, such as accounts payable and accrued expenses.

Meanwhile, Long-Term Liabilities are debts that are due in more than one year, such as mortgages and long-term debt.

Equity

Finally, the equity section reflects how much the company's owners own in the company. This includes share capital and retained earnings.

If the company is a non-profit organization, this section is referred to as net assets.

Equity also includes contributions from new owners, returns on capital, and profits or losses generated by the company.

How to Create a Financial Position Report

Through the financial position report, you can clearly see how much money and assets the company has and how much debt must be paid.

The process of preparing this report involves several important steps, starting from identifying financial transactions to preparing the final report.

Here's how to create a financial position report:

• Identify transactions: find out all financial transactions made by your company.
• Record transactions: write all transactions in your notebook and group them according to type, for example money in or out.
• Post to the ledger: enter all transactions into the ledger to be more organized.
• Prepare a trial balance: create a trial balance from the ledger to see the total balance of your accounts.
• Create a column worksheet: arrange the worksheet with columns to organize financial information more neatly.
• Create a financial post report: use information from the column worksheet to create a financial position report.

By understanding the financial position report in depth, you can have a clearer view of the company's financial health.

In addition, you can also identify potential risks and opportunities for better company growth in the future.

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