Financial reporting is an important task for businesses in the Philippines to ensure compliance with local regulations and provide insights into financial performance. Even if you’re not the person preparing the financial report, understanding how to write one helps you interpret financial data, make informed decisions, communicate effectively with stakeholders, and confidently know you’re compliant with Philippine law.
What is a Financial Report?
A financial report is a formal document summarizing a business’s financial performance and position over a specific period. In the Philippines, corporations are required to submit audited financial statements to the Securities and Exchange Commission (SEC) under Section 177 of the Revised Corporation Code. Likewise, Section 232 of the NIRC (as amended by the TRAIN Law) requires businesses earning ₱3 million or more annually to file a report with the Bureau of Internal Revenue (BIR).
Financial reports typically consist of the following parts:
- Income Statement: Details revenues, expenses, and net income.
- Balance Sheet: Shows assets, liabilities, and equity at a given time.
- Cash Flow Statement: Tracks cash inflows and outflows.
- Statement of Changes in Equity: Reflects changes in owners’ equity.
- Notes to Financial Statements: Explains accounting policies and additional details.
These reports help stakeholders, including owners, investors, and regulators, assess profitability, liquidity, and solvency. For Philippine businesses, adherence to Philippine Financial Reporting Standards (PFRS) or PFRs for SMEs is mandatory, ensuring transparency and consistency.
How to Write a Financial Report
Creating a financial report for a Philippine business involves several steps to ensure accuracy and compliance. Here’s a practical approach:
- Gather Financial Data:
Collect records like sales invoices, expense receipts, bank statements, and payroll details. Use BIR-approved accounting software or maintain ledgers to stay compliant with regulations. - Choose the Reporting Period:
Based on your goal, decide whether the report covers a month, quarter, or year. For instance, you may need to prepare an annual report for SEC submission to ensure compliance with regulatory requirements. - Prepare Financial Statements:
Required financial statements typically include:
- Income Statement: Summarize revenues (e.g., sales) and expenses (e.g., rent, utilities) to calculate net income.
- Balance Sheet: List assets (e.g., cash, inventory), liabilities (e.g., loans, accounts payable), and equity. Ensure totals are balanced (Assets = Liabilities + Equity).
- Cash Flow Statement: Categorize cash flows into operating, investing, and financing activities.
- Statement of Changes in Equity: Document contributions, withdrawals, and retained earnings.
- Include Notes to Financial Statements:
Disclose accounting methods (e.g., FIFO for inventory) and compliance with PFRS. Note tax obligations, such as withholding taxes under the TRAIN Law. - Ensure Compliance:
Verify adherence to BIR and SEC guidelines. For example, include BIR registration details and ensure proper tax computations. - Review and Finalize:
Double-check calculations. We can help prepare and audit your financial report for you to ensure it is ready for submission to the BIR, SEC, and other institutions.
Financial Report Example
We’ve created simplified examples of financial statements below to help you understand the items in a financial report. These are based on a hypothetical Manila-based sari-sari store, “Dalisay’s Store,” preparing its annual report for 2024.
Dalisay’s Store
Simplified Financial Statements
For the Year Ended December 31, 2024
(Amounts in Philippine Pesos)
Income Statement
| Description | Amount (PHP) |
| Sales | 1,200,000 |
| Cost of Goods Sold | 800,000 |
| Gross Profit | 400,000 |
| Expenses (Rent, Utilities, etc.) | 300,000 |
| Profit Before Tax | 100,000 |
| Tax | 0 |
| Net Profit | 100,000 |
Balance Sheet
| Description | Amount (PHP) |
| Assets | |
| Cash | 130,000 |
| Inventory (Goods for Sale) | 200,000 |
| Equipment (Store Fixtures) | 100,000 |
| Total Assets | 430,000 |
| Liabilities and Equity | |
| Liabilities | |
| Amounts Owed to Suppliers | 50,000 |
| Total Liabilities | 50,000 |
| Equity | |
| Owner’s Investment | 350,000 |
| Profit Kept in Business | 30,000 |
| Total Equity | 380,000 |
| Total Liabilities and Equity | 430,000 |
Statement of Cash Flows
| Description | Amount (PHP) |
| Cash from Operating Activities | |
| Net Profit | 100,000 |
| Increase in Inventory | -20,000 |
| Increase in Amounts Owed to Suppliers | 5,000 |
| Depreciation (Equipment Wear) | 10,000 |
| Total Cash from Operating Activities | 95,000 |
| Cash from Investing Activities | |
| Purchase of Equipment | -30,000 |
| Total Cash from Investing Activities | -30,000 |
| Cash from Financing Activities | |
| Owner’s Withdrawal | -50,000 |
| Total Cash from Financing Activities | -50,000 |
| Net Increase in Cash | 15,000 |
| Cash at Start (January 1, 2024) | 115,000 |
| Cash at End (December 31, 2024) | 130,000 |
Notes on the Examples:
- The Income Statement shows performance over a period (2024), including total sales, expenses, and net profit.
- The Balance Sheet shows the store’s financial position at year-end, with assets equaling liabilities plus equity, following the accounting equation: Assets = Liabilities + Equity
- The Statement of Cash Flows explains how cash moved in and out of the business, broken into:
- Operating activities (daily business)
- Investing activities (buying equipment)
- Financing activities (owner’s withdrawals)
- This is only a simplified example to help you understand the components of a financial report. For submissions to the BIR, SEC, and other institutions, ensure your financial report is prepared and audited by a licensed Certified Public Accountant (CPA).
- We can assist you with preparing and auditing your financial report.
Summary
Writing a financial report for a Philippine business involves collecting accurate data, adhering to PFRS, and complying with BIR and SEC regulations. The sample statements illustrate how small businesses can apply these principles in practice. The same principles also apply to larger firms, helping you understand their operations despite more complex transactions. If you need help preparing or auditing your financial report, our expert team is ready to assist you.
Are You Seeking Assistance or an Audit for Your Financial Report?
Preparing accurate financial reports is important for Philippine businesses to ensure compliance and make strategic decisions. It involves gathering precise data, adhering to accounting standards, and meeting government regulations. The process can be challenging, especially for businesses without a dedicated accounting department or with an overworked team.
Thankfully, Business Registration Philippines offers professional support for your business, including bookkeeping, payroll, auditing, and other accounting tasks. Our team specializes in accounting and compliance-related services, ensuring your internal audits are thorough and aligned with Philippine regulations.
Contact us today to schedule an initial consultation with our experts.
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