In a market economy, the profitability of a company in finance, manufacturing and investment is expressed in its financial performance. The value of profit as the main indicator of finance also plays the role of a stimulator for the further prosperity and development of the company, and is also important in the public sector, being the basis for calculating taxes to the federal budget.
The issues of improving financial results are the most important for any commercial organization, since the financial result reflects the financial result of managing the organization as a whole and its individual divisions.
The financial result indicates an increase or decrease in the cost of capital of the company, which is formed in the process of its functioning.
Improving financial results often indicates such important processes as increasing the profitability of the enterprise, the implementation of planned indicators, the introduction of innovations, as well as increasing the overall efficiency of the enterprise.
Concept
The financial results of the enterprise are determined, first of all, by the quality indicators of the products manufactured by the enterprise, the provision of services, the level of demand for these products (services). The level of demand depends on market conditions, the type of products sold, the state of economic sulfur and other factors.
The financial results of the company are characterized by the amount of profit and level of profitability. In a market economy, the value of profits is enormous. The desire for profit orients enterprises to increase production, satisfy consumer needs, and reduce production costs.
With developed competition, this not only achieves the goal of entrepreneurship, but also satisfies social needs. For a firm, profit serves as an indicator indicating where the greatest increase in value can be achieved, creating an incentive for investment in these areas. Losses also play a role. They highlight errors and miscalculations in the direction of funds, organization of production and sales processes.
The financial result should be understood as the increase in the value of equity of the company, which occurs due to the conduct of business activities of the company for a specified period of time.
If we take the concept of accounting, then the financial result should be understood as the difference between the income received and the expenses incurred by the company. This indicator characterizes the level of success of the company in the market.
In accounting, this difference is identified as profit (loss), reflected in the profit and loss account in the financial statements of the company.
In turn, profit is the most important basis for the development of the enterprise, which creates the basis for financing in new technologies and production, in the social areas of personnel development.
Therefore, achieving and focusing on the profit of an economic enterprise is an end in itself. Profit is the basis for identifying the effectiveness of the organization, shows its business activity.
Regulatory framework
If we consider the system of accounting for income, expenses and financial results in our legislation, then we can identify the existence of a four-level system.
At the first level, such documents as the Tax Code of the Russian Federation, the Federal Law "On Accounting", and the Regulation on Accounting are considered. These are the fundamental documents in the accounting system, which define the basic rules and procedures.
The second level lists documents such as accounting regulations that are approved by the Russian Ministry of Finance. They present the main requirements for maintaining counts in the relevant areas and for reporting the company.
At the third level, methodological recommendations and instructions for maintaining financial results accounting are distinguished. Among the documents can be identified: chart of accounts, instructions for its use.
Finally, at the fourth level, the working documents of the organization forming the accounting policy are highlighted.
The most important document in the whole system is PBU 10/99 “Organization expenses” and PBU 9/99 “Organization incomes”.
Record keeping
When examining a financial result in accounting, the following accounts are used:
- 90 “Sales” is used to calculate the financial result using the indicators of income and expenses of the company in the directions of the functioning of the company.
- Account 91 “Other income and expenses” is used to calculate the financial result in the areas of other income and expenses of the company.
- Account 99 “Profit and loss” uses summary information on the financial results of the company.
- 84 “Retained earnings” reflects the total information about the company's profit, which remains at its disposal.
To 90 account, sub-accounts are opened in the following areas: revenue from sales, cost of sales, profit from sales (loss), VAT.
All accounts for accounting for financial results are presented in the current legislation.
In the debit, accounts 90 show the value of the cost of sales. Here you can also see the company's revenue in the loan, including VAT.
The table below shows the structure of account 90.
Profit | Lesion |
The total total turnover for all operations for the period | The total total turnover for all operations for the period |
No balance | No balance |
When using account 99, the procedure for accounting for financial results is as follows:
- The results of the company are reflected.
- The final results from other activities are visible.
- Profit tax is shown.
- Net profit is visible.
The entry in the financial performance accounting system is as follows:
- Dt 90-9 Ct 99 - the amount of profit;
- Dt 99 Kt 90-9 - the amount of loss.
We account 90 with synthetic accounting there is no balance at the end of the period, sub-accounts are open.
The closure entries are as follows:
- Dt 90-1 Ct 90-9 - closed income;
- Dt 90-9 Kt90-2 - the prime cost is closed.
When conducting analytical accounting on 90 accounts, I separately distinguish each product, work performed and keep records in this context.
Profitability Analysis
For accounting, an active-passive account 99 is used. On it, credit is profit, and debit is loss.
In the case when income is higher than expenses, a positive balance is formed, which is reflected in the credit of account 99. Otherwise, a negative result is recorded in the debit as a loss.
The cumulative principle of reflection of operations is applied, in which the values of profit and expenses are accumulated in total and are reflected on an accrual basis by the end of the year.
The balance in the account can be established by subtracting expenses from the amount of profit from the beginning of the year.
To reflect information on the presence and movements of profit (loss), account 84 is used. On it, net profit can be written off to the final turnover in December for credit of account 99. The amount of loss is written off by closing the results in December for debit 84 of the account.
The total net loss for the year can be written off by closing in December for Dt-84 and Kt-99.
When conducting analytical accounting for 84 accounts, information is generated on the directions of use of funds from the company's net profit.
The main problems of accounting
Among the main problems in the studied area are:
- Reliability of calculations of financial results of the company.
- Organization of an audit of the legality of the operation for the distribution and use of profits.
The form
The financial result, accounting and reporting for this category is expressed in the reporting forms. They reflect the amount of income that was received by the company for a certain period of time, as well as the amount of expenses for the same period. Net profit is formed by subtracting from the total revenue of all expenses with the addition of other income. The income tax amount is also deducted:
Revenues - Expenses = Net Income.
Report on financial results is a very important document for a number of researchers, for example, for investment analysts, investors. For large companies participating in trading on stock exchanges, the data on the indicators of the study report affect the price of shares. These values are studied by stock analysts and make predictions about the strengthening (or vice versa, reducing turnover) of the company in the near future.
If a firm receives a stable income, especially over several years, this means a high probability of the fact that it will be able to cover its debts to existing creditors, banks, and investors. That is why reliable reporting on financial results is a significant point, especially for large corporations.
The statement of financial performance contains the following information:
- the amount of income received by the company as the sum of all funds earned by the company in all types of activities;
- the amount of expenses as the value of the costs incurred in the process of functioning and conducting business.
Performance analysis
The method of accounting and analysis of financial results uses various tools and methods, the most popular among them are: horizontal analysis of indicators and the method of vertical analysis, as well as the coefficient method.
Horizontal analysis involves the following sequence of steps:
- Indicators for 2-3 periods are calculated.
- The indicator of the current period is compared with the data of the past, a chain methodology of research is obtained, conclusions are drawn on the dynamics.
- The indicator of the current period is compared with the baseline data, a basic research technique is obtained, and conclusions are drawn on the dynamics.
Horizontal analysis is a rather informative method, since it allows you to evaluate the dynamics of the studied values in the time interval.
Unlike horizontal, vertical analysis operates with relative indicators. The sequence of calculations is as follows:
- We take the value of the indicator for a certain period and evaluate its share in a more general structure (for example, the share of profit in the revenue structure).
- We evaluate the shares for each element and for each period of the study (2-3 years).
- Compare the change in shares in the dynamics for 2-3 periods.
- We draw conclusions on the dynamics of the growth or reduction of the shares of different elements.
The use of both methods is very popular in company finance analytics.
The coefficient method also operates with relative indicators. Within the framework of this approach, the following sequence of actions is possible:
- Identification of coefficients to be used for analysis.
- The calculation of the coefficient by the formulas.
- Comparing them with normative indicators.
- Comparison of their dynamics over several reporting periods.
For the analysis, an indicator such as profit margin is calculated:
M = PE / V,
where: M - net profit margin;
PE - net profit;
In - total revenue.
This indicator estimates the amount of net profit that the company receives for each ruble of sales.
Another indicator is gross profit margin:
MV = VP / V,
where: MV - gross margin;
VP - gross profit.
This indicator measures the amount that falls on each ruble of sales.
Organization of control activities
The established procedure for the audit and revision of knowledge of the formation of financial results of a company aims to establish an objective truth about the truth and legality of reflection in the financial statements of the revenue, expenses and financial results of the organization.
There are two types of audit of accounting for financial results: external and internal.
The effectiveness of control over the accounting of results in enterprises largely depends on the organization and implementation of internal audit procedures. Internal control is a constantly operating process created and implemented by the organization’s management to obtain reasonable and sufficient goals to achieve objectives in the following areas: efficiency and profitability, reliability of reporting data, compliance with existing procedures.
The system of internal control of financial results includes monitoring of all types of activities of the enterprise, since each action, each economic operation, carried out directly or indirectly, affects the final result of management.
External control of accounting for financial results is the audit of the financial activities of the company by state bodies.
An important role in the implementation of external audit procedures is played by tax authorities, since for them financial results are the central base for calculating taxes and forming a federal budget.
This control is also carried out at the request and request of the creditors of the company (for example, banks, suppliers). This audit comes down to checking the formation of the final management indicator, that is, profit.
In general, the control process should include three stages:
- Organizational.
- Research.
- The final.
Organizational should include:
- preliminary study of the characteristics of entrepreneurial activity;
- study of the accounting status of income, expenses and financial results;
- development of a program for monitoring financial results, calculation of methodological control methods.
At the stage of research of control over financial results, general scientific, analytical and documentary control methods should be applied.
At the final stage of control, the identified violations are described in terms of passing the audit. Such violations may relate to the primary, current accounting system of financial results. After the assessment and identification of violations, it is necessary to obtain an explanation of them from the company. The final step is to group and summarize the identified deficiencies in the relevant document.
Monitoring the formation of profit in enterprises is necessary because it allows you to identify errors and shortcomings that the company makes in its activities.
Example of accounting for financial results
We pass from theory to practice. Consider an example of accounting for financial results. In accordance with the terms of the contract, Start LLC sells goods to the buyer in the amount of 120 tons. The cost of production is shipped 100 tons
Accounting Sequence:
- We reflect the cost of products for shipment: Dt 90-2 Kt43 - 100 000 rubles.
- We reflect the income from the products sold (debt is charged to the buyer): Dt 62 Kt 90-1 - 120 000 rubles.
- We calculate the result of the implementation:
120 - 100 = 20 t. (profit)
Dt 90-9 Ct 99 - 20 000 rub.
The company from the sale made a profit of 20 tons The main accounts for account 90 “Sales” are shown in the table below.
No. p / p | Operation and its characteristic | Dt | Ct |
1 | Written off the cost of services in fact in relation to own vehicles | 90-2 | 23 |
2 | Write-off of general business expenses | 90-2 | 26 |
3 | Write-off of the cost of production in fact in the sales process | 90-2 | 40 |
4 | Write-off of cost of sales | 90-2 | 43 |
5 | Charged to the organization of the sales process | 90-2 | 44 |
6 | Written off the cost of the fact on shipped products | 90-2 | 45 |
7 | Defined VAT value of sales of goods | 90-3 | 68 |
8 | Reflected profit from sales | 90-9 | 99 |
9 | Reflection of sales revenue | 62 | 90-1 |
eleven | Closed sub-account “Revenue” | 90-1 | 90-9 |
12 | Closed sub-account "Cost of sales" | 90-9 | 90-2 |
thirteen | Closed sub-account “VAT” | 90-9 | 90-3 |
14 | Written off loss from sales | 99 | 90 |
Conclusion
Getting a positive financial result is a significant achievement of the company. If the company's profit is in the black, then we can talk about the right strategy for functioning in the market.
The financial result in accounting creates the basic guarantees for the future existence of the company, including the accumulation in the form of various reserve funds that can overcome the consequences associated with the sale of products on the market.