Updated July 24, 2015
Why are the dates on financial statements important Chicago Illinois
Because you can’t do financial statements without dates or a period of time and expect them to be relevant.
An Income Statement shows an income or loss of an entity over a period of time. It has to be for example, from January 1st to December 31st of a given year. It can’t just be whenever. A Balance Sheet, showing a company’s Assets, Liabilities, and Equity, must be as of a certain date. The values of those Assets, for example must be as of the close of business on a specific day. Generally, using the prior example the Balance Sheet would be as of the last reporting date of the reporting period for the Income Statement, or December 31st of that example year.
The accompanying supporting documents of the financial statements must also have corresponding dates, in order to provide a corresponding proof and relevance. The Bank Statements and other Cash or Cash equivalent accounts must be balanced as of the date of the Balance Sheet. The Detail General Ledger must show all of the transactions for the period of the Income Statement.
The only way to measure a company’s financial performance is based upon dates. If used properly this is also a way to reduce your expenses and increase profits given the cyclical nature of most businesses.
If you are asking this question in the first place, then you probably don’t have a decent accountant.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.