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financial reports Definition

The importance of accounting

Accounting is one of the most important sciences that will conduct analyzes and complete financial transactions in their proper form, as a company or institution is not without a financial and accounting department specialized in accounting and financial work related to the company or institution or perhaps employees and individuals, where accounting science includes in its content and essence: A set of financial foundations and rules on which the accountant relies in conducting financial transactions in their entirety and to the fullest extent, and the science of accounting contains a group of sub-processes such as internal auditing and preparing financial reports related to companies and individuals, and in this article we will talk about the method of preparing financial reports.

financial reports Definition

Financial reports or financial statements, are defined as a set of written and documented financial records that transfer and detail activities and business in addition to the financial performance of companies and institutions, where these records are audited and reviewed by specialized government agencies from accountants, financial auditors or companies Specialized in internal auditing, in order to ensure accuracy in preparing financial reports in addition to taxes or investment purposes. Financial reports are prepared in order to detail the financial position of the company or institution in addition to profits and losses and determining ownership.
financial reports Definition
financial reports Definition

The importance of financial reports

Financial reports are considered one of the most important pillars upon which the science of accounting in its general form is based, because of the accuracy and detail of the financial information related to companies and institutions in addition to organizations. There are several points that explain the importance of financial reports:
  • Determine the financial and commercial capacity of the company or institution, in order to avoid any losses and increase profits.
  • Determining and detailing the company's indebtedness and whether it is able to pay it on an ongoing basis.
  • Track and note the financial results in detail and in the cases of profit and loss.
  • Determining the financial ratios according to the commercial activity of the company or institution in its general form.
  • Verifying and reviewing details and accurate financial data in the business transactions of the company or organization both internally and externally.

Financial reporting method

In detailing and analyzing their financial statements, companies depend mainly on the preparation of periodic financial reports, in order to avoid any losses and the possibility of increasing the profit opportunity:
  • Preparing the balance sheet: the balance sheet. The balance sheet is one of the most important elements of financial reporting, because it is the material assets and liabilities of the company, in addition to the net financial profits and losses during a specific period of time.
  • Preparing the income statement: The income statement is one of the important pillars on which the financial statements and reports are based, through which the details related to the company's assets are clarified, in addition to the comprehensive income, profits, losses and net income of the company over a period of time.
  • cash flow statement, by which users of financial or accounting statements are provided with information about money received or paid over a period of time.
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