Preparation of Financial Statements
Financial statements contain information about the economic condition of a company. The importance of the statements is that give more information about the company than you might think. These stataments are prepared to provide information about the financial transactions of the company at a certain time and the economic changes and financial status resulting from these transactions. For example, it shows how the company’s assets are, how much the company debts, does the company make a profit. It also contains important information about how the company manager uses the company capital entrusted to them.
Financial statements are indicated in Turkey Accounting Standardarts(‘’TAS’’). Financial statements are formed balance sheet and income, cash flow and shareholders’ equity and their annexes.
TCC 514 provides that the board of directors prepares the financial statements and annual report of joint stock companies. The board of directors prepares annual activity report of board anf financial statements stipulate in TAS within the first three years of the accounting period following the balance sheet day and submits it to the general assembly.
All daily transactions of the company during the preparation of the financial statements are recorded in the journal. During the recording process to the journal, each transaction is given a number and those are recorded in the order in transaction date. For example, a joint stock company operating in the textile industry bought goods, rented a shop and paid bills. These transactions are recorded itemized journalized for one year. Later, all transactions in the journal entries are classified and transferred to the general ledger.
In other words, these transactions, which are recorded in the journal, regardless of their qualifications, will be classified and transferred to the general ledger. For example, expenses incurred, revenues obtained, commercial goods are classified separately. At the end of these stages, financial statements are prepared where all the information of the relevant period can be seen in summary form. Therefore, the financial statements are summary of the transactions for enterprise.
Financial statements and financial information included in the annual report of the board of directors are audited by independent auditors. Financial statements and the annual activity report of the board of directors, which reports have not been audited, are considered as invalid.
Principles of Financial Statements in Joint Stock Companies
While preparing the financial statements of joint stock companies which should be prepared in accordance with the true and fair view principle. The principle true and fair view is regulated in Article 515 of the TCC, and it means that the financial status and operating results of capital companies at the end of the operating period are fully, comprehensibly, comparable, appropriate to the needs and the authentic translation, in a transparent and reliable manner and the truth is reflected in an honest, true and faithful manner. The independent auditor audits the fulfillment of this obligation of the company's board of directors and gives his opinion in the audit report.
The principle of true and fair view is a superior rule of law and includes four mandatory principles together:
-Year-end financial statements are prepared according to Turkish Accounting Standarts.
-The company's assets, debts, liabilities, equities and operating results are understood from the financial statements.
-Give an outlook of the company's situation. This outlook should reflect the truth honestly and accurately.
-Financial statements should be complete, understandable, comparable with previous years, appropriate to the needs, transparent and reliable.
