Financial Reports and Business

Financial reports are the result of the accounting process held in a business. Financial reports are mostly generated once in a year by the accounting department or by the accountant of a business. Financial reports show the financial information of the business so that internal and external parties of a business can create a good decision out of it.

Why are Financial Reports Important for A Business?

Again, like I told you, financial reports show financial information of a business. Financial reports show how financially healthy a business is and how the financial position is for a business. It evaluates what has happened throughout the past years and observes what will likely to happen in the future.These financial information are the foundation of the management, both internal and external of a business, to make the better decision for the sake of the business. This helps the management decides what the business should do in the future and what things should be avoided.

How are Financial Reports Created?

Financial reports are the product of an accounting process. So, financial reports should be created using several rules of accounting. In the global world, there is something called “generally accepted accounting principles” that rules out what should be shown in a financial report and how it should be created. This generally accepted accounting principles should be obeyed by all accounting bodies in all jurisdictions all over the world.

There are several kinds of financial reports created once in every year. The most common financial report is the Statement of Cash Flows, which shows you the cash inflows and cash outflows of a business throughout the year.There is also an Income Statement, which shows you the profits or losses that the business generates during the year. This is also a vital financial report for a business because it reflects the process of a business through the year.

Speak Your Mind