Financial reporting. Financial reporting refers to all the activities, procedures and systems involved in recording, organizing, measuring, and reporting financial information. The activities included in this category may include: financial statement preparation; income statement preparation; balance sheet preparation; statement reconciliation; and tax reporting. Financial reporting can be conducted through written reports, electronic means (e-statements), or manual methods. Financial reporting also involves the maintenance and support of records. Financial reporting is often performed as part of an accounting system which includes financial statements, ledgers and journals, and management information systems (MIS).
Financial accounting principles. Financial accounting principles are designed to help businesses and companies make better decisions and control their financial resources. Principles can be applied to all aspects of accounting; however, they are particularly important when dealing with financial statements, as they provide the foundation on which the financial information is based. The principles of financial accounting can include:
Companies must have adequate and relevant documentation when preparing their financial accounts. Financial documents include such items as the books and records of accounts; financial statement and related information; and accounts receivable and accounts payable. All these records are used to prepare and interpret financial statements. Companies’ financial documents are then analyzed and reported to other parties such as creditors, investors and financial institutions.
Financial statements are the primary source of information for financial reporting purposes. These are created and used to give a complete picture of a company’s financial condition and performance. Financial statements should contain reliable and consistent information regarding the activities, results, and transactions that affect the income, expenses, assets, liabilities, capital, and net worth of the company. Financial statements also include accounts payable and accounts receivable. to indicate the total amounts outstanding on account of loans, mortgages and leases and accounts payable.
Internal control over financial reporting. There are two types of controls over financial reporting, namely internal control over financial reporting and external controls. Internal control involves supervision and review of the company’s accounting processes by the company’s management. External controls involve an independent third party, such as a bank or an insurance agency, that monitors and supervises the company’s financial accounts.
Management’s responsibility for the preparation and interpretation of the financial statements is necessary to ensure that the company’s financial statements accurately represent the nature, amount, and characteristics of its financial resources. The statements prepared by the accountant or bookkeeper contain information that are needed to make sound decisions regarding the company’s assets, liabilities, revenue and expenses.
Financial reporting and accounting policies. Companies must maintain strict accounting policies that control the use of its funds, protect the company’s assets, and report the company’s financial data and information to authorized parties. Financial reporting policies include the need for financial statement preparation that comply with generally accepted accounting principles (GAAP), the requirement that management’s financial reports include the assurance of their accuracy, and the need to obtain the consent of shareholders for certain financial reports.
Auditors are required to evaluate and monitor the accuracy of the financial reports to determine whether they are in conformity with GAAP standards. The auditor provides a written report to the management company or to the shareholders of the company about the results of the examination.
The auditor verifies the accuracy of the financial reports with the assistance of a qualified public accountant who is not related to the company. The auditor also examines and tests the financial records to assure themselves of the company’s ability to present accurate financial reports. for tax purposes.
Financial statements help businesses to understand and track and forecast future performance. They are important for making strategic decisions concerning acquisitions, debt obligations, product development and marketing plans, expansion, and other financial matters. The accounting information presented to the public helps to determine the profitability of the company and enables management to take reasonable steps to maximize the company’s value.
