Subscribe To This Site
Accounting ReportsIn this section we're going to be looking at the various types of accounting reports that are generated by an accountant and the accounting system. The most important accounting reports are called the financial statements. Remember that the word statement, as used in the term financial statements, simply means a report. So the financial statements are simply financial reports. The financial statements are prepared from the information in the trial balance. Return to this simple lesson on the trial balance if you would like to brush up on this preliminary accounting report. Accounting reports come in various formats and all provide different information. However, they all have one thing in common: they give useful information about a business (or about an aspect of the business) to the reader.
But here's a question - who are the readers of the financial statements? Who are these reports prepared for? 
Well, the financial statements are like the business scorecard - they show if the business is doing well or not. The people who want to see the financial statements are the people that are interested in this business scorecard - the guys who want to know how well the business is doing. These people, in rough order of importance, typically include: 
1) Business owners - They have the most direct interest in how well the business is doing. The better the business performs, the more money they make.2) Business executives - Managers (people employed by the owners to run the business) will get fired if the business performs poorly, or get bonuses if it performs well! 3) Investors - Investors are only going to invest in businesses with good scorecards. 
3) The bank - They are interested in the financial statements (the business scorecard) of businesses they have a relationship with. For example, they may want to look at the financial statements to see how risky it would be to loan money to the business.4) The government and tax authorities - They want to know that the business is fulfilling their legal duties, and in particular, that they are paying enough tax! The financial statements give a good idea of how much tax the business should be paying over. 
5) Suppliers - Suppliers want to get paid by the business they are supplying goods to! So oftentimes they will check the financial statements of the business well before they even begin to make any agreements to trade with them.6) Employees - Though this is not often the case, an employee may want to know how well the business is doing so he or she can plan for the future. For example, if the business looks like it might fall apart soon, the employee would probably want to start looking for another job! Financial statements are usually prepared once a year, but can be prepared more often. Alright, let's check out the reports themselves. Start with our first lesson, where we go over an example of an income statement, which is the first report of the financial statements. When you are done, move on to the second lesson, where we'll take a close look at the
statement of changes in the owner's equity.
The cash flow statement is another report included in the financial statements. In our final lesson we're going to take a look at some of the
other accounting reports.
These reports do not form part of the financial statements - the most important reports of the business - but are nonetheless commonly used within many businesses today.
Ask Us a Question About This LessonStill scratching your head after going through this lesson? No problem. Send us a question you have relating to this lesson or topic... Return from Accounting Reports to Home Page
|
