What to pay attention to when analyzing annual reports?

We are sending the annual reports for  the previous year for initial review: trial balance, profit (loss) statement; debts, inventory, long-term asset turnover, and remaining salary balances.

The data will change if:

  • there are missing primary documents (purchases, sales, bank statements, cash documents, fuel write-off acts, travel orders, civil (service) contracts, etc.);

Explanations for the balance sheet lines:

  • paid advances to suppliers, debts of buyers, advances received from clients, debts to suppliers may be higher amounts due to uncovered debts. Debts are covered when all documents are received.
  • the cost of goods purchased for resale is the amount in euros of the goods remaining in inventory at the end of the year (the balance can be high if there is a lack of a confirmed inventory report and write-off act (relevant for those who have goods)).
  • the cost of acquiring fuel is the amount in euros of the fuel remaining at the end of the year (if there are missing fuel write-off acts, the fuel is not written off as an expense (relevant for those who use a car)).
  • prepaid corporate income tax – how much was paid during the year as an advance on corporate income tax (relevant for companies that are obliged to pay advance corporate income tax).
  • accountable person’s debt:
    •  in class 2 – how much the person owes to the company,
    •  in class 4 – how much the company owes to the person.
    • payable taxes – calculated taxes payable for month 202X, with the payment due in month 202X+1 (e.g., pollution, property, and other taxes).

Explanations for the profit (loss) statement:

  • you will see detailed income and expenses for the past year. The report shows preliminary profit (with a plus sign) or loss (with a minus sign).

Explanations for the debt report:

  • data is as of December 31st of year 202X,
  • with a plus sign are debts to the company, i.e., paid advances to suppliers or the accounting department lacks purchase invoices;
  • with a minus sign are debts of the company, i.e., advances received from clients or the accounting department lacks payment documents: bank statements, transfers from personal accounts, cash orders, or cash receipts.

Explanations for the inventory report:

  • report data as of December 31st of year 202X,
  • the report shows inventory balances in units and monetary value.

Explanations for the long-term asset report:

  • The report contains data on long-term assets for the beginning of year x, depreciation, changes (acquisitions/sales) during year x, and the balance at the end of year x.
  • In the column “End-of-Period Carrying Value,” the value of owned assets at the end of year x is provided.

Explanations for the employee debts report:

  • In the “Debt” column, the total amount of unpaid salaries as of December 31 of year x is listed.
  • In the “Accrual Amount” column, the total accrued amount for year x is shown.
  • In the “Deduction Amount” column, the total amount deducted for taxes from salaries for year x is displayed.
  • In the “Paid Out” column, the total amount paid out to employees during year x is indicated.

If you see that the accounting department is missing documents – send them to your accountant.

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