Financial Reporting
As the elected representatives of your community, you have a responsibility to present balanced and accurate financial reports. With KESCH Management on your side, you can trust that your financial reports will be delivered with the care and attention to detail your community deserves. With the help of KESCH Education, we utilize the KESCH 5-Minute Financial Review for every set of financials we issue to ensure that you are empowered with the financial knowledge you need to make important decisions for the community you represent.
Step 1:
Assets = Liability + Equity
The top half of your balance sheet is assets and the bottom half of your balance sheet is liabilities and equity. A typical balance sheet will have totals for the top half and the bottom half independently, and these numbers should match. If they do not, your balance sheet is out of balance.
Step 2:
Balance Net Income
The last line on your balance sheet and the last line on your income statement are the net income or net loss for the period. Make sure that the two numbers match.
Step 3:
Balance the Assets
On the top half of the balance sheet, an account called Accounts Receivable is considered an asset since it is money owed to you by someone else. This line on the balance sheet should match the total for the Accounts Receivable report, which is a detailed report of the sub-ledgers for money owed. Note that this account will not show on a balance sheet if you are running your books on Cash Basis rather than Accrual.
Step 4:
Balance the Liabilities
On the bottom half of the balance sheet, an account called Prepaid Liability is considered a liability because it is money that has been paid to you by someone, but you have not yet earned the money. In other words, you have not yet justified keeping the funds, so there is a potential for those funds to be returned. This line on the balance sheet should match the total on the Prepaid report, which is a detailed report of sub-ledgers for money paid to you.
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​On the bottom half of the balance sheet, an account called Accounts Payable is considered a liability because it is money recorded as an expense that has not yet been paid to a vendor. In other words, this account shows money owed to someone else but not yet paid. This line on the balance sheet should match the total of the AP report which is a detailed list of the items recorded as expenses but not yet paid. Note that this account will not show on a balance sheet if you are running your books on Cash Basis rather than Accrual.
Step 5:
Reconciliations
The bank reconciliation report shows the bank statement ending balance compared to the balance of the same account on the balance sheet.
It is common for the bank account line item on the balance sheet to be different than the balance in the physical bank account or on the bank statement, and the reconciliation report is the explanation of the difference.
The bank statement balance should match the amount found on the bank statement for the report date, and the GL amount should match the balance sheet. The difference between the two should match the total of all uncleared checks and deposits on that date.
DISCLAIMER:
Keep in mind that this guide is for identifying accounting issues that are common when using an unfamiliar accounting software. This guide can’t and shouldn’t be used for anything specific to an accounting setup or less common methodology. This guide is for informational purposes only and is not meant to be a substitute for professional accounting or tax advice.