Financial Reporting Plays An Important Role in The Business Organization
Financial reporting or preparation of financial statement represents to the formal record of the financial activities of business, person, or other entries. Generally, the financial reporting accountants perform this function. It contains all the relevant financial information in a structured manner that is very easy to understand. These statements are considered as an integral part of the business reporting.
The main objective of the financial statement is to provide accurate information about the financial position. They are useful for assessing the business performance and changes in the financial position over a specific period. These statements also include a wide range of economic decisions taken by the respective departments.
There are mainly four basic financial statements such as balance sheet, income statement, statement of the cash flow, and statement of retained earnings. The financial reporting accountants have to work over some complex and extensive set of financial statements. They consider each and every item on the balance sheet like cash flow statement and income statement. The accuracy in information comes through financial reporting. The use of reporting software in both large and small organizations eases the process of assessment. Such accountants can trace the changes in the financial position and evaluate the success of various production functions.
Different business organizations may use the financial statement for different purposes. Financial statements are used by the owners and managers to make certain decisions. Such decisions would have their own effects on the business operations. These statements can also be used by the management to present annual reports. On the other hand, employees require these reports in making collective bargaining agreements with the management. Investors get a great help from financial statements to assess the viability of the investment.
Financial institutions and government agencies use the financial statements to make policy for the company. They can decide whether to grant a company or extend debt securities to support the significant expenditures. The government entities need such statements to ascertain the amount of taxes and other duties that are to be imposed on the company. Media and public are also keen in the financial statements for their own interests. In this way, the role of financial reporting accountants becomes crucial for satisfying the aspirations of all these people throughout the business process.