How to Make Financial Statements for Small Business

February 20, 2024
minutes to read
Ben Mensah
Table of Contents

Learning how to make financial statements for your small business can be a complex task for even the most savvy of small business owners - especially while trying to adhere to the Australian Accounting Standards Board principles. This guide unravels the essentials of preparing the three key financial reports under Australian accounting standards - the balance sheet, income statement, and cash flow statement - and presents a simplified and automated approach to managing these complexities with Thriday.

How to Make Financial Statements Using Australian Accounting Standards

Navigating the financial landscape as a small business in Australia comes with its unique share of rules and regulations. Arguably, the most challenging of these can be mastering the accounting standards and principles that companies in Australia are governed by.

In Australia, the benchmark for financial reporting is set by the Australian Accounting Standards Board (AASB) - ensuring transparency, consistency, and comparability across all financial statements and companies. Let's explore a few key questions and then delve into the process of preparing financial statements that adhere to the AASB principles:

What is the Australian Accounting Standards Board?

The AASB is a governing body develops and maintains Australia's financial reporting standards. The AASB adopts the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), both widely considered global standards, and reissues them as a complete set of Australian Accounting Standards.

These standards are principles designed to apply to the general-purpose financial statements and other financial reporting of all reporting entities in the country. The purpose of this framework is to ensure that reporting across businesses is consistent and transparent so that companies' financials can be fairly compared both locally and across international borders.

What Are the Principles of the AASB Accounting Standards?

The principles set out by the AASB are designed to ensure that financial statements are accurate, fair, and consistent across all businesses. Below are some of the core principles that govern our accounting process:

  • Accrual Principle: Transactions are recorded when they occur, not when cash is exchanged.
  • Conservatism Principle: When there are uncertainties, accountants should choose the option that is least likely to overstate assets and income.
  • Consistency Principle: Accounting methods and procedures should be consistent from one period to the next.
  • Economic Entity Principle: The business is considered a separate entity from its owners.
  • Full Disclosure Principle: The financial statements should disclose all relevant information.
  • Going Concern Principle: The business is assumed to continue operating in the future.
  • Matching Principle: Expenses should be recorded in the same period as the revenue they helped generate.

Which Reports Are Required for a Small Business?

The Australian Accounting Standards Board (AASB) requires companies operating in Australia to prepare several key financial reports at the end of each financial year to provide a comprehensive overview of their financial position and performance.

The primary reports required are:

  • Balance Sheet: Often referred to as the Statement of Financial Position, the balance sheet offers a financial snapshot at a particular moment, illustrating the entity's assets, liabilities, and equity to provide a comprehensive view of its financial standing.
  • Income Statement: This document highlights the financial performance of an entity over a specified timeframe, encapsulating all revenues, expenses, and the resulting profit or loss to convey a clear picture of financial efficacy and operational profitability.
  • Cash Flow Statement:  A detailed guide to the entity's cash movements throughout a period, this statement categorises cash inflows and outflows into operational, investment, and financing activities, offering a lens into liquidity and solvency.
  • Statement of Changes in Equity: This highlights the variations in an entity's equity throughout a reporting period, covering aspects like net income or loss, dividends, and other pertinent adjustments to transparently depict equity fluctuations.
  • Notes to the Financial Statements: A supplementary guide, these notes provide additional context and detailed breakdowns related to the data presented in the main financial statements, enhancing understanding and providing deeper insights into the entity's financial status.

Adherence to the AASB principles is not merely a regulatory requirement but a commitment to transparent, reliable, and consistent financial reporting.

It ensures that financial statements are a true reflection of an entity's financial position and performance but also that they can be trusted and relied upon by stakeholders, thereby fortifying the entity's reputation and credibility in the financial landscape.

Preparing Financial Statements Using Thriday

In the old days, preparing financial statements per the Australian Accounting Standards Board (AASB) guidelines was a tedious process that burdened small business owners all over the country.

While necessary, maintaining compliance, accuracy, and transparency while navigating all the different types of transactions and reporting requirements demands a significant amount of time and expertise. As a next-generation all-in-one financial management platform, Thriday represents a revolution in banking* and accounting where the report generation process is automated. Small business owners no longer need to waste countless hours creating the reports they need!

Thriday is crafted to automate and eliminate financial admin for small business owners in Australia. Seamlessly integrated with your business banking*, Thriday leverages the power of AI to automatically categorise your incoming and outgoing transactions and generate key financial statements instantly.

With Thriday, there's no need for manual reconciliation or mastery of the obscure intricacies of financial statement preparation. User-friendly business-wide integration means the preparation of your financial statements is automated and continuously updated with every incoming and outgoing transaction, providing you with an instantaneous overview of your business's financial health whenever you need it.

No tedious manual categorisation, no preparation nightmares, and no more sacrificing your Sunday nights trying to get that balance sheet to balance! Thriday takes care of the financial admin, allowing you to focus on what you do best - steering your business towards success.

Discover how our satisfied customers utilise Thriday to streamline their financial management effortlessly here.

How Does Thriday Work?

Thriday is an all-in-one financial management platform that automates your bookkeeping, accounting, and financial report generation to show the health of your business in real time. With built-in business transaction accounts* and a VISA debit card, banking* happens in the same platform as your accounting - enabling everything to be automatically organised and eliminating the need for financial admin.

Not just another accounting software, the platform is a game-changer for businesses keen on optimising their financial processes. Here's why:

  • Seamless Integration with Bank Accounts*: Thriday provides a user-friendly app, complete with integrated bank accounts*, guaranteeing that all incoming and outgoing transactions are automatically synchronised with the platform - eliminating the need for separate bank feeds and manual data entry. Find out more about Tireless Transacting with Thriday here.
  • Automated Accounting: Harmonising all your transactions into a single platform, Thriday employs AI to automatically reconcile and categorise your transactions, crafting every essential accounting report your small business requires. Effortless access to continuously updated financial statements like cash flow, income statements, balance sheets, tax summaries, and beyond - Thriday shoulders the burden, sparing you the accounting headaches, time, and financial strain. Discover the power of Automated Accounting here.
  • Receipt Reconciliation: Scan, send, and save receipts on the go with Thriday. Snap a picture of your receipts, and the platform will automatically store them and reconcile personalised deductions, ensuring they're securely stored and readily accessible when tax season arrives.

Simply use your Thriday integrated business transaction accounts* to cover regular income and expense transactions and let the platform handle the rest - automatically reconciling transactions to easily prepare your financial reports so that you never have to worry about financial admin again!

Thriday platform
Thriday is an all-in-one financial management platform designed to automate and eliminate financial admin for small business owners

How to Prepare an Income Statement

To prepare an income statement in accordance with AASB accounting principles, follow these steps:

  1. Determine the reporting period: The first step in preparing an income statement is to determine the reporting period that the statement will cover. This can be a month, quarter, or year. The reporting period in Australia is typically the financial year from 1 July to 30 June of the following year.
  2. Identify your revenue: List all the revenue earned by the company during the reporting period. This includes sales revenue, service revenue, and any other income earned by the company.
  3. Determine the cost of goods sold: If the company sells products, determine the cost of goods sold by subtracting the cost of goods from the revenue earned.
  4. Calculate gross profit: Calculate the gross profit by subtracting the cost of goods sold from the revenue earned.
  5. Identify your operating expenses: List all the operating expenses incurred by the company during the reporting period. This includes salaries, rent, utilities, and other expenses.
  6. Calculate operating income: Calculate the operating income by subtracting the operating expenses from the gross profit.
  7. Determine other income and expenses: List any other income or expenses that the company incurred during the reporting period, such as interest income or expenses.
  8. Calculate net income: Calculate the net income by subtracting the other income and expenses from the operating income.

If this sounds like a lot - fear not! Run your business as usual with Thriday and let the rules-based AI system handle the tedious categorisation and preparation process for you.

Get started with Thriday today and skip the admin!

Thriday income statement
Thriday creates and manages your business' Income Statement and other financial reports automatically to keep you updated in real-time

How to Prepare a Cash Flow Statement

To prepare a cash flow statement in accordance with AASB accounting principles, follow these steps:

  1. Determine the starting balance: The first step in preparing a cash flow statement is determining the starting balance of cash and cash equivalents at the beginning of the reporting period. This value can be found on the income statement of the same accounting period.
  2. Calculate cash flow from operating activities: This section of the cash flow statement shows the cash inflows and outflows from the company's core business operations. This can be calculated using either the direct method or the indirect method.
  3. Calculate cash flow from investing activities: This section of the cash flow statement shows the cash inflows and outflows from the company's investments in assets such as property, plant, equipment, and intangible assets.
  4. Calculate cash flow from financing activities: This section of the cash flow statement shows the cash inflows and outflows from the company's financing activities, such as issuing or repurchasing stock, paying dividends, and taking out or repaying loans.
  5. Ensure the cash flow statement is balanced: Compare the net increase or decrease in cash and cash equivalents against the starting balance of cash and cash equivalents to make sure they balance.

With the cash flow statement, the same applies! Let Automated Accounting handle the headache and get real-time access to user-friendly and intuitive financial statements with Thriday.

Thriday cash flow statement
Enjoy the benefit of a simple and clear Cash Flow Statement generated automatically from your transactions in Thriday's all-in-one financial management platform

How to Prepare a Balance Sheet

To prepare a balance sheet in accordance with AASB accounting principles, follow these steps:

  1. Determine the reporting date and period: A balance sheet is meant to depict the total assets, liabilities, and shareholders’ equity of a company on a specific date, typically referred to as the reporting date. In Australia, the annual reporting date is typically the end of the financial year – 30 June.
  2. Identify your assets: List all the assets of the company, including current assets such as cash, accounts receivable, inventory, and prepaid expenses, as well as non-current assets such as property, plant, equipment, and intangible assets.
  3. Identify your liabilities: List all the liabilities of the company, including current liabilities such as accounts payable, short-term loans, and accrued expenses, as well as non-current liabilities such as long-term loans and deferred tax liabilities.
  4. Calculate shareholders' equity: Calculate the shareholders' equity by subtracting the total liabilities from the total assets. Shareholders' equity includes the company's retained earnings, common stock, and additional paid-in capital.
  5. Ensure the balance sheet is balanced: Compare total assets against total liabilities plus equity to ensure the balance sheet is balanced.

The story is the same for the balance sheet, chart of accounts, tax summaries and more! Thriday's integrated approach enables the seamlessly automated generation of the critical reports you need as a small business owner in Australia.

Thriday balance sheet
Assets and liabilities are automatically categorised into a Balance Sheet to give you a complete summary of your business' financial health

Simplifying Financial Reporting with Thriday

The extensive process of preparing financial statements in compliance with AASB principles can be a daunting task for businesses in Australia. The standards ensure important principles such as transparency, consistency, and reliable financial reporting but can become overwhelming when managing everything manually.

In this guide, we've explored the essentials of AASB principles and the key financial reports required, offering a comprehensive roadmap for financial reporting in Australia for those who want to go it alone. But remember that you don't have to anymore! Simplify and automate these complex processes with the powerful yet simple Thriday platform and reclaim your time.

Explore a world where financial management is straightforward and hassle-free with Thriday, offering a seamless, automated platform that integrates banking* and accounting to effortlessly prepare financial statements.

Join Thriday today and step into a simplified financial management journey.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

Why waste time on financial admin when Thriday can do it for you?

Already have an account? Login here
Thriday Debit Card


Live demo this Thursday at 12:30pm.