Financial reporting is a key element of business investment that is held important both from the stakeholder’s point of view, as well as of the company. Read this article to find what reporting entails and how this system promotes good competition across international sectors.
What is the purpose of Financial Reporting?
Financial reporting is basically the disclosure of financial outcomes and related information that is given out to management and external stakeholders. It contains all data about how a company is performing during a specific period of time.
Reporting includes all of a business’s communication of financial data to people not directly related to the company, such as investors, customers, regulators.
What does Financial Reporting entail?
Financial reports are usually passed out on a quarterly and annual basis, which include the following:
- Balance Sheet– Also known as Statement of Financial Position, it contains reports on a company’s assets, liabilities, and the owners’ equity at a given point of time, typically the end of a fiscal quarter or year.
- Income Statement– Generally referred to as Profit and Loss Report, it holds data on a company’s income, expenses, and profits during a period of time, like a fiscal quarter or year. Additionally, it may include sales and other expenses incurred during the stated period.
- Statement of Changes in Equity– This is also referred to as Statement of Retained Earnings, which includes reports on the changes in equity of the company during the determined period, such as a fiscal quarter or year.
- Cash Flow Statement– This is a special aspect of financial reporting that holds reports on a company’s cash flow activities, including its operations, investments, and financing activities. They are also known as sources and uses of cash.
Importance of Financial Reporting
- The importance of financial reporting is recognized by each and every stakeholder for multiple reasons and purposes. The following points put emphasis on why the reporting framework is important –
- It helps an organization comply with various statues and regulatory requirements;
- It facilitates a statutory audit that is required to audit the financial statements of an organization to demonstrate their opinion.
- Financial Reports are the backbone for financial planning, benchmarking, analysis, and decision making, mostly used by various stakeholders.
- Reporting assists organizations in raising capital for both domestic as well as overseas transactions.
- On the basis of financials, the public as a whole can analyze the performance of an organization in concern as well as of the entire management.
- For the purpose of furthering bidding, labor contract, government supplies, and similar processes, organizations are required to develop their financial reports & statements.
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If you want financial reporting skills to advance your professional career, choose to get knowledge about financial reporting today. Apply now and help enhance the economic development of the ant sector you are passionate about.