Financial reports are a key element in running a business, but where do they come from? If you’re looking to understand the creation process of a business’s financial statements and reports, then look no further. Find out where financial reports come from and who creates them.
Documents Used in Financial Reporting
Let’s break down a company’s financial reporting process and determine what documents are included in the reporting process. As a business owner, you must look at your accounting and bookkeeping records to find this information. It is the business’s accounting ledgers and journals where all daily transactions are recorded and tracked. A business will compile this data into their financial statements.
It is these financial statements that make up the core of a business’s reports. The four main statements that need to be included in a company’s financial reporting include:
- Income statement
- Balance sheet
- Cash flow statement
- Statement of retained earnings
Every accounting period, a business will need to update its statements to reflect the newest information and the business’s current financial position.
Learn more about these documents with this guide to financial statements.
Who Prepares Financial Statements?
There are various ways businesses can prepare financial statements, including:
- Doing it themselves
- Accounting software
- In-house Accountants and bookkeepers
- Third-party accounting firms or contractors
The one responsible for the preparation of these reports will vary from business to business. Many small and medium enterprises run as sole-proprietorships or partnerships, will create these reports themselves, or use other internal or external sources to do so. Small companies typically do not keep an in-house accountant or bookkeeper, so they sometimes outsource these responsibilities, including the financial reports, to a third party.
Accounting software, like QuickBooks Online, can help you create your financial statements and reports for your small business as it tracks and records all transactions for accurate and detailed data collecting over a period of time.
Corporate financial statements, on the other hand, are typically more in-depth and complicated financial information, so they will have a group of accountants to work on their reports. Incorporated businesses, or corporations, generally have much larger accounts and operations/ systems than small businesses. As a result, a firm or team of accountants are usually responsible for the preparation of a corporation’s financial statements and reports.
Larger businesses will also use auditors to look over the completed reports and cross-reference the accounting data to ensure all figures are correct on the corresponding financial statement reports. An auditor is an individual or a firm hired by a company to audit its accounts and records.
Auditors will need to possess specific qualifications and must be certified by the regulatory authority of accounting and auditing, such as the Chartered Professional Accountants, to legally practice in the industry. These requirements ensure auditors are quell equipped to accurately evaluate a company and its financial statements for potential investors, creditors, or governmental bodies.
How Are Financial Reports Made?
The same people responsible for the financial statements can also cover the preparation of the company’s financial reporting. Business owners can choose to do it themselves or use accounting software to help them. Alternatively, companies can use their in-house accountant or bookkeeper or hire an outside accountant or auditor to compile or audit the extensive reports for them.
Whoever this responsibility falls to- whether inside or outside of the company- they will need to follow a set of industry standards and rules which dictate how financial data is recorded and presented in the reports.
International Financial Reporting Standards
The International Financial Reporting Standards, or IFRS for short, is an independent global organization that dictates the conceptual framework and standards for financial reporting. Therefore, all businesses use IFRS and its guidelines when making their reports for each accounting period.
Using QuickBooks to Generate Statements and Reports
If you don’t have a personal auditor, then QuickBooks accounting software can work for you to cover your business’s accounting needs. Track expenses and revenue and generate your income statement, cash flow statement, the balance sheet for comprehensive reporting when QuickBooks syncs to your business accounts and automatically updates information in real-time.
Sign up today and QuickBooks can sync to your accounts to start tracking cash flows, financial information, and more!