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How to prepare a simple financial system?
The concept of financial system
The term financial system refers to that basic base on which all information systems are based in the body of a single establishment, and the importance of the financial system is to achieve interdependence and complementarity between the various systems and specifically administrative ones, and this imposes its control on many administrative processes that leave a profound impact in making decisions taken from division officials in the company, and no facility can ever be free of this financial system.
The financial system was also defined as an integrated financial organization that allows the exchange of funds from payment and receipt between the borrower, the lender and the investor through the application of the rules of financial systems adopted nationally and globally, and this term is considered broad, as it includes all financial services, banks, private and public sectors and financial markets and everything related to them, as well as serving customers and members.
The components of financial system
- The first of the components of financial systems and perhaps the most important components of financial system is the financial intermediary, and this components of financial systems is referred to in every financial institution that plays an effective role in moving capital towards investment. The money-moving institutions are classified into financial intermediaries and financial distribution institutions, including stock brokers, investment banks and many others. It is also possible to include entities or institutions transfer funds within the list of financial intermediaries as part of the components of financial system.
- The second components of financial systems, and also an important components of financial systems is the financial assets, the term financial assets as part of the components of financial systems is called all the tools and securities embodied in the form of products, goods and services through which it deals with financial intermediation institutions, and is divided into primary securities of financing instruments, loans, debts, bonds, secondary securities and financial markets as well that constitute a hotbed for trading securities.
- The third components of financial systems and also an essential part of the components of financial systems is the facilitating exchange of securities, which includes taking facilities in the procedures followed in organizing the exchange of securities and dealing with them, and facilitating transactions of monetary systems by accreditation in addition to providing the necessary information about financial indicators and movements necessary to make the most important decisions about buying and selling or maintaining the security.
The importance of a good financial system
The importance of good financial system is as follows:
- A good financial system enables finding a close relationship between economic growth and achieving economic goals in regions and enterprises.
- A good financial system enables bringing the necessary financial resources to carry out the necessary economic activities and procedures to achieve the desired goals.
- A good financial system enables actual judgment on the results of a country's economy and its progress.
- A good financial system enables facilitating the process of trading securities.
- A good financial system enables organizing the process of offering and demanding capital in financial markets.
- A good financial system enables ensuring that the financial needs of the economic units are provided and strengthened with everything necessary.
- A good financial system enables contributing to a remarkably advanced economic system.
- A good financial system enables motivating the units to carry out the economic tasks entrusted to them by providing them with everything they need.
- A good financial system enables plays the role of mediator between the parties to the economic process, especially in the event of someone providing financial liquidity.
- A good financial system enables a very important role in exploring and setting market prices
Preparing FS:
- The first step in preparing FS is to get acquainted with the company's internal administrative structure and to know its activities and its characteristics in an accurate manner.
- The second step in preparing FS is to create the appropriate preliminary financial guide after your study and analysis of the company’s structure and activity.
- The third step in preparing FS is to establish a documentary course to organize work, taking into account preventive control and separation of duties as much as possible, according to the company’s structure.
- The fourth step in preparing FS is to approve a set of documentary books or an accounting program that meets the needs.
- The fifth step in preparing FS is to identify the actual inventory of the company's assets.
- The sixth step in preparing FS is to verify the correctness of the balances for the accounts of customers and suppliers and any other accounts by requesting financial matches for the balances of the accounts with the suppliers, customers and banks.
- The seventh step in preparing FS is to prepare a trial balance and making the necessary adjustments to reach actual balances and balance.
- The eighth step in preparing FS is to prepare the financial position list for the first time.
- The ninth step in preparing FS is to record the operations regularly on a daily basis and ensure the integrity of the documentary session.
- The tenth step in preparing FS is to determine the procedures for internal control and auditing.
- The last step in preparing FS is to set the financial policies that the company will follow in calculating commissions and dividends, and calculating depreciation of assets, and an opening audit balance must be prepared for the account balances, so that the accounts of customers, suppliers, related parties and banks must be verified that they are identical to what is registered with them in their records to be the opening balances.
The importance of a good financial system
The importance of good financial system (reliable financial system) is as follows:
- A good financial system (reliable financial system) enables finding a close relationship between economic growth and achieving economic goals in regions and enterprises.
- A good financial system (reliable financial system) enables bringing the necessary financial resources to carry out the necessary economic activities and procedures to achieve the desired goals.
- A good financial system (reliable financial system) enables actual judgment on the results of a country's economy and its progress.
- A good financial system (reliable financial system) enables facilitating the process of trading securities.
- A good financial system (reliable financial system) enables organizing the process of offering and demanding capital in financial markets.
- A good financial system (reliable financial system) enables ensuring that the financial needs of the economic units are provided and strengthened with everything necessary.
- A good financial system (reliable financial system) enables contributing to a remarkably advanced economic system.
- A good financial system (reliable financial system) enables motivating the units to carry out the economic tasks entrusted to them by providing them with everything they need.
- A good financial system (reliable financial system) enables plays the role of mediator between the parties to the economic process, especially in the event of someone providing financial liquidity.
- A good financial system (reliable financial system) enables a very important role in exploring and setting market prices
How to prepare financial reports?
Financial reports are an information document concerned with the financial situation of a company or institution that includes the balance sheet and income statement as well as the statement of cash flows. The financial reports are often reviewed and analyzed by business managers, boards of directors, investors, financial analysts, and government agencies. Therefore, these financial reports must be prepared and circulated in a timely, accurate, and clear manner. Although the financial reports seem difficult to prepare, accounting in general is not so difficult.
Financial reports are a written presentation of financial information in an organized analytical manner with an indication of its results and suggestions. Financial reports is presented to the officials of reaching the financial decisions in the organizations with the aim of enhancing their ability to take appropriate decisions to invest the company's financial resources in an appropriate way to achieve its goals and development, rather than assisting them in following up and evaluating the implementation of financial plans, and thus it is one of the pillars of the development of institutions of all kinds.
Benefits of preparing financial reports
Preparing financial reports has many benefits for the entity, the following are the main benefits for preparing financial reports:
- When preparing financial reports, it provides effective way to communicate between administrative levels, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables follow up on the evaluation of the performance of individuals and administrative units, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables evaluating the work of the institution, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables documenting the work, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables support the ability for effective planning, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables strengthening the ability to combat financial obstacles, through providing reports that are rich of charts, figures and numbers.
- When preparing financial reports, it enables improving the capacity to develop and invest material resources, through providing reports that are rich of charts, figures and numbers.
Preparing to write the report
- Select the time frame. Before you begin, you'll need to specify the time period your financial report will cover. Most financial reports are prepared quarterly and annually, although there are also some companies whose financial reports are prepared on a monthly basis.
- To determine the time period within which your financial report should be prepared, review government documents for your organization, such as regulations, founding charter, or incorporation contract. These documents often describe how to prepare financial reports.
- Ask the CEO of your organization about the usual approach expected to prepare the reports in that organization.
- If you are the current CEO in the organization, estimate for yourself the appropriate time to prepare financial reports that are useful to you and choose it as a specific date for your financial report.
- Review your account books. You will then need to ensure that all data in the books of accounts is up to date and properly recorded. Your financial reports will be of no use to its owners in case the existing accounting data is incorrect. For example, make sure that all paid and received accounts are already prepared and that the bank reconciliation is complete and that all inventory purchases and product sales are recorded.
- You will also need to consider any liabilities not recorded at the reporting date.
- Collect any missing information. If, while reviewing your books of accounts, you discover any missing information, track any relevant documents you will need to confirm your financial reports are complete and correct.
Considerations in preparing financial reports
- Determine the type of report: to know its criteria, its specific features, and its purpose.
- Willing to write: dividing the tasks required to write the team, determining the responsibility of each of the contributors in preparing it, and determining the time set for the completion of each sub-task.
- Initial preparation: includes monitoring the performance of team members and progress in achieving the desired tasks.
- Preparing the draft report: meaning assembling and coordinating linguistically and technical parts of the report, and reviewing and evaluating it.
- Final preparation: It is the preparation of the final version of the report after applying the notes referred to in the previous stage.
Types of financial reports
- Trend Report: It includes the results of similar financial activities during a specific period of time. It reviews the results of similar activities in the past with the aim of supporting the ability to predict its future direction.
- Analytical report: It is the purposeful report to compare similar financial activities.
- Gains and losses report: It is a brief report that shows the profits and losses of the organization during a specific time period.
- Cost report: Shows data on the cost of carrying out a specific task, such as developing something or making adjustments.
- Periodic report: It is prepared regularly at specified time periods.
- A non-periodic report: it is prepared to deal with a specific opportunity or problem.
- Monthly Report: Evaluates the financial situation for each month.
- Quarterly Report: Submitted every three months.
- Mid-term report: Refers to the semi-annual report.
- Annual report: final evaluation for the year.
- Progress report: It includes financial statements about activities executed during a specific period of a specific project, spending plan, and obstacles.
- Final report: means preparing a final financial report for each project.
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