What is a statement Financial Report?

Communicating a financial is known as a Financial reporting. Financial reports used in Financial reporting are records that disclose financial information about a company’s activities and current status of business. The major components in Financial reporting are:

Balance Sheet

A balance sheet portrays the value of assets owned by an organisation, liquidity and solvency of the organisation. The balance sheet is utilised to study the ability of the organisation in meeting its financial goals.

Statement of Profit and Loss

This document illustrates an organisations total income, expenses, and profits/losses over a certain period of time. A profit and loss statement also provides information on the operations of the organisation.

Cash Flow Statement

The cash flow statement merges the balance sheet and the income statement to highlight business activities which include operating, investing and financing activities that involve inflow or outflow of taxes.

Notes and Schedules

This provides additional information explaining different parts of the financial statement, such as risk, uncertainties or accounting policies that affect the organization. The basic objective of financial reports is to provide information about the financial health, status, growth and modifications in the financial position of an organisation that will be useful to a wide range of stakeholders in making business decisions.

Why do you need financial reports?

Reports provide information to the following stakeholders:

Owners, managers, and employees

These require financial reports to make important business decisions that will help sustain the organization’s continued operations.

Investors/potential investors

These enable them to utilize financial reports to assess the overall feasibility of investing in a particular business. Financial reports also help in analysis for making better investment decisions.

Financial institutions

They utilize financial reports to decide whether or not to grant an organization loans that may be needed to expand or meet working capital needs. Different countries have developed indigenous accounting principles, making international comparisons of an organization’s financial report difficult to analyze. To ensure a universal uniformity between financial reports prepared by different companies in different countries, a set of guidelines and rules are used which is commonly referred to as Generally Accepted Accounting Principles (GAAP). These are a set of accounting guidelines which provide the foundation for the preparation of financial reports. In brief, Financial reports are designed to be easily grasped and understood by an audience who have a working knowledge of business and accounting activities and who are willing to study the respective information and implement it accordingly.
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  1. Statement of Changes in Equity is the reconciliation between the opening balance and closing balance of shareholder’s equity. It is a financial statement which summarises the transactions related to the shareholder’s equity over an accounting period.
  2. The analysis of financial statements involves gaining an understanding of the financial situation of an organization by reviewing the organization’s financial statements.
  3. CMA report,/Credit Monitoring Arrangement report is a report showing the projected performance and the past performance of a business in financial terms. It contains required financial ratios and metrics to help Financial Analysts and Bankers to ascertain the financial health of a business. Learn mo
  4. The Statement of Financial Transactions or Form 61A is a record of specified financial transactions that should be furnished under the Income Tax Act. Find out which are there specified financial transactions are and what to do in case of nil returns here.
  5. Ledger is the skillful grouping and presentation of the Journal entries. They provide structure to accounting and facilitates preparations of various financial reports. To understand better, read here.
  6. Trial Balance is presenting multiple entries in various accounts which make a Ledger. Taking all the ledger balances and presenting them in a single sheet as on a particular date. Read this article to know more.
  7. Sometimes the bank balances as per cash book and bank statement doesn’t match. It is important to identify the differences and reconcile them. Bank reconciliation statement is prepared for this.
  8. Every business wants to know the incomes earned and expenses incurred during a particular period, The ultimate aim is to know if the final outcome is the Profit or loss. Check format of the Profit and loss statement/account here
  9. Balance Sheet is part of any financial statement which provides a snapshot of entity’s financial condition on a given date. Read on to know about the Balance sheet in simple.
  10. As prescribed by the AS 3, there are two methods which can be used to prepare cash flow statement, Indirect method, and Direct method