What are the steps to tick and tie financial statements?
You may be wondering what “tick and tie” means. It refers the action an accountant performs when he agrees one financial statement number to another. For example, the accountant can compare total assets with total liabilities and equity–they should be the same. If they are not, something is wrong. This is the purpose of ticking and tieing numbers: to ensure that the financial statements are correct. Accountants also compare financial statement numbers with note disclosures or to supplementary information. Again, many such numbers should agree.
Financial statements come in a wide variety of presentation formats depending on the industry and the requirements of the financial reporting framework (e.g., generally accepted accounting principles). Below I provide common numbers that accountants tick and tie (agree), assuming the financial statements include:
Keep in mind the accounting equation: Total Assets = Total Liabilities + Total Equity. All three (total assets, total liabilities, total equity) appear on the balance sheet.
Also, remember that net income–which appears on the income statement–is the result of subtracting expenses from revenues. In equation form, the formula is Net Income = Revenues – Expenses.
Here are the numbers that should agree:
The above list of tick-and-tie numbers is not comprehensive. There are too many variations in financial statement presentations to provide a full universal list. But, hopefully, this helps.
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Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events.Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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