How to Make an Accounting Report: A Simple Guide
An accounting report is a document that summarizes the income and expenditures of an organization or community for a certain period of time.
There are times when small groups such as company clubs, labor unions, communities, and neighborhood associations need a document that records the flow of money generated over a certain period of time. This is where accounting reports come in. Compared to the “financial statements” prepared by companies, accounting reports tend to be more concise, but they are essential documents for group members to understand the flow of money and the status of operations.
What is an accounting report (income and expenditure report)?
This is a document that summarizes income and expenditures for a specific period, such as a year or a month. It is created for the purpose of organizations and communities reporting their operational status, and by disclosing the increase/decrease in “income” and “expenses” and the breakdown of each, it is intended to facilitate organizational management and activities.
Difference between income statement and accounting report
There is a document similar to the accounting report called the “income and expenditure report,” but as mentioned above, there is no particular difference between the accounting report and the income and expenditure report, just the name. Both are documents that record the income and expenditure situation for a specific period.
Difference Between Financial Statement and Accounting Report
A “financial statement” is a detailed accounting report document prepared mainly by corporations. If an accounting report is prepared by a certain organization at the end of a fiscal year to report its income and expenditure status for the year, then a financial statement is prepared by a company at the end of a fiscal year to report its financial status to shareholders, banks, etc.
A financial statement is made up of three documents: a balance sheet, an income statement, and a cash flow statement. In addition, unlike most accounting reports, which use single-entry bookkeeping, a double-entry bookkeeping method uses the concept of debits to indicate an increase in assets and credits to indicate a decrease in assets, making it easier to understand the financial situation.
Purpose of Preparing an Accounting Report
There are three purposes for preparing an accounting report:
Share your income, expenses and assets
The primary purpose of accounting reports is to clarify the financial situation and assets of the organization and share the information with the entire organization. Members can check how shared assets are being used and the balance, such as whether membership fees have been used for inappropriate purposes or whether the organization is in a financial position to operate without problems in the next fiscal year.
If accounting reports are not prepared properly, it will be impossible to know when, where, and for what the common property was used, leading to poor management. As a result, members will become distrustful of the flow of money and become less proactive in activities, which will hinder the operation of the organization.
Decide the policy for the next year
Accounting reports allow you to check the flow of money over a certain period of time, and to understand how much of the remaining budget and surplus funds there are. This helps you decide on policies such as “how much income you can expect and need” and “how to spend the budget” for the next fiscal year.
If your organization is in the red, you will need to consider increasing membership fees and reducing expenses. Conversely, if you have a surplus in the budget and a large amount of carryover funds, you may want to consider reducing membership fees and making temporary expenses such as minor repairs. Creating an accounting report and sharing it within your organization will enable you to manage your budget appropriately and effectively.
Share your cash flow challenges
Financial reports are a useful way to share financial issues with members and to share financial management issues. If a particular event or project is causing a decline in the balance sheet, you may need to reconsider how you are spending your funds there.
Situations where accounting reports are required
Accounting reports are also prepared by labor unions, neighborhood associations, etc. Let’s take a look at the situations in which accounting reports are required.
Company events, clubs, and circle activities
Accounting reports are also required for company events, clubs, and circle activities.
Company events such as year-end parties, New Year’s parties, and social gatherings are often subsidized by the company, but in most cases, dues must be collected from employees. Also, for club and circle activities, the collected dues can be used to create uniforms and pamphlets, purchase equipment necessary for operation, or to pay for participation in events outside the company or to hold friendly matches.
Labor unions, etc.
Since labor unions collect union dues from their members, they need to prepare accounting reports. The purpose of the reports is to understand the income and expenditure situation, including the management of monthly union dues and the management of expenses necessary for operation. At the same time, they are important documents for showing members the transparency of accounting, such as whether expenses necessary for operation are being used appropriately.
Others
Accounting reports should not only be prepared by companies, but also when there is a large amount of money coming in or going out from a large number of people.
First, there are local activities. These include events for children and families, neighborhood association events, and local festivals. You will need to manage the printing of announcement posters, the setting up of stalls, and the part-time wages of event staff. In addition, repair costs for portable shrines will also be managed as reserve funds in the accounting report.
Next, there are school-related activities. Many schools collect annual contributions for club activities as well as school trip expenses. The cost of refreshments required for regular meetings by the PTA and parent-teacher associations is also managed in the accounting report.
Management associations of apartment complexes also require accounting reports. The status of management fees and common area charges, as well as expenditures of repair reserve funds, are disclosed in the accounting report each fiscal year, along with income, expenditures, and reserve balances.
Items to be included in accounting reports and how to write them (template)
Here we explain what should be included in the accounting report and how to write it.
General Accounting
The general accounting department manages general income and expenditures, including membership fees and sales.
Financial reporting period (fiscal year)
Indicate that it is an accounting report and the accounting reporting period (fiscal year) . In the following example, the reporting unit is one year (fiscal year).
Revenue section
Income is recorded by account category. Membership fees, sales, miscellaneous income, etc. Also, carryover funds from the previous year should be recorded here.
This is an example of how to write the income section.
| Item Name | Account | Budget | Achievements | Difference Amount | Remarks |
|---|---|---|---|---|---|
| Revenue section | Annual Fee | $200,000 | $220,000 | $2,000 | |
| Sales | $50,000 | $60,000 | $1,000 |
Expenditures
Describe expenses by account category. These include labor costs, utility costs, transportation costs, and consumables costs.
This is an example of an expenditure section.
| Item Name | Account | Budget | Achievements | Difference Amount | Remarks |
|---|---|---|---|---|---|
| Expenditures | Labor Costs | $60,000 | $60,000 | 0 | |
| Utility Expenses | $50,000 | $45,000 | $5,000 | ||
| Electricity Bill | $30,000 | $27,000 | $3,000 | Gas Bill | |
| Transportation expenses | $60,000 | $64,000 | -$4,000 | ||
| Consumables cost | $20,000 | $22,000 | -$2,000 | Additional orders |
Carryover funds
The amount obtained by subtracting expenditures from income in the current fiscal year (total difference) is the surplus for the current fiscal year. This is added to the carryover from the previous fiscal year and carried over to the next fiscal year.
This is an example of how to write carryover funds.
| Item name | Carryover from previous year | Surplus | Total (carried over to next fiscal year) |
|---|---|---|---|
| Carryover funds | $120,000 | $62,000 | $182,000 |
Signature
A signature section will be provided. At least two signatures are required: the person in charge and the auditor.
This is an example of the signature section.
| Item Name | Post | Address and name |
|---|---|---|
| Signature | Responsible person signature | Address: 123 Main Street, Springfield, IL 62704, USA — Name: Jack |
| Signature of Auditor | Address: ____, ____ city Springfield — Name: Leach |
Special Accounts
Certain income and expenses, such as repair reserves, entertainment expenses, and travel expenses, should be managed as special accounts separate from the general account. Each should be recorded under a separate account heading.
This is an example of how to write the reserve fund section.
| Item Name | Account | Budget | Achievements | Difference Amount | Remarks |
|---|---|---|---|---|---|
| Reserve Fund Section | Repair reserve fund | $300,000 | $250,000 | $50,000 | |
| Entertainment expenses | $30,000 | $30,000 | 0 |
Important points to note when reporting financial statements
Now that you understand what should be included in an accounting report and how to write it, let’s also review the points to keep in mind when reporting.
Treatment of balance sheet
There are two methods of bookkeeping: single-entry bookkeeping and double-entry bookkeeping. In principle, single-entry bookkeeping only requires you to record income and expenditures, and this method of description is used in many accounting reports. No bookkeeping knowledge is required, so anyone can do it easily.
On the other hand, double-entry bookkeeping requires bookkeeping based on concepts such as “debit” and “credit,” and the records are detailed. In addition, it is necessary to create a “balance sheet” to manage assets and an “income statement” to manage profits and losses, which are difficult to create without knowledge of bookkeeping. If you adopt double-entry bookkeeping, you will need someone with accounting knowledge, such as accounting experience in a company.
Paying taxes
Even if it is a small-scale club or circle activity, you should be careful if you are making continuous sales through your activities. Article 4 of the Corporation Tax Law defines voluntary organizations such as clubs and circles as “unincorporated associations, etc.” and requires that they file a corporation tax return if they are conducting a profit-making business. Examples of such organizations include the following:
- The club rents out some of its properties to third parties and receives monthly rental income.
- They set up stalls at large-scale social events that are held regularly and sell goods to an unspecified number of people.
- Several companies participate in the league competition which takes place throughout the year, and admission fees are collected from an unspecified number of visitors.
Accounting reporting challenges
If you are a small organization with little money going around, you are unlikely to have any major problems with accounting reports. However, if you are a fairly large organization or have frequent money going around, accounting procedures can often become complicated.
In such cases, we recommend using accounting software instead of manually tabulating financial reports. Not only does it make it easier to create financial reports, but it also allows you to accurately and continuously understand the flow of money and the management status of your organization over a period of time. In addition, even when complex accounting entries are made, you can proceed with the tabulation work without confusion.
FAQ
What is an accounting report?
An accounting report is a document that summarizes the income and expenditures of an organization or community for a certain period of time. It is often called an “income and expenditure report” and is used almost synonymously. In addition to being created for the purpose of reporting and sharing the status of operations, disclosing the increase or decrease in “income” and “expenses” and the breakdown of the results allows for a deeper understanding of the organization’s activities.
What is the purpose of preparing accounting reports?
There are three purposes for creating accounting reports: to share the status of income and expenditures and assets owned, to decide on policies for the next fiscal year, and to share issues related to cash flow. If accounting reports are not prepared properly, not only will it be unclear how expenses are being used, but shared assets will also be managed carelessly. As a result, members of the organization or community may become distrustful, which could cause problems in operations.
What should I pay attention to when filing financial reports?
When preparing an accounting report, you must choose either “single-entry bookkeeping” or “double-entry bookkeeping.” If you choose double-entry bookkeeping, you must prepare a “balance sheet” and an “income statement.” Even if you are a small club or circle, if you are making continuous sales through your activities, you will need to file a corporate tax return.