Report financial data is even more useful to know. Businesses, governments, and people use various sorts of reports to monitor the inflow and outflow of money. This reports enable making better decisions about money. In this article, we cover all the different types of financial reports & explain it in simple words. You will also discover why these reports are useful, who uses them and how they are utilized to grow a business or plan for the future.
There are numerous types of financial reports that are used in business. A business generates its report by time period on a subject forex) and profit. Some describe how much a company owns or owes. Other accounts describe how the money flows in and out. These reports aren’t simply for company owners. They are used by government officers, banks, investors, and even employees to get an insight into the financial health of a company.
In this article, we will look into all types of corporate financial reporting, types of financial accounting and types of financial reporting framework in India as well. You will also discover the different types of financial analysis reports, to check business performance.
What is Financial Reporting?
Financial reporting refers to the sharing of financial information of a business in a structured format and is focused on the business entity. These reports give people insights into how a company makes money, spends money, and saves money.
All businesses prepare financial reports — big or small. These reports follow a standard that everyone can understand. This process allows a business to give a fair and transparent report to its stakeholders.
These reports stand by standards named financial reporting frameworks. There are certain frameworks, applicable internationally, such as IFRS (International Financial Reporting Standards) which are used worldwide. Some are only in use in a single country. So, India has its own financial reporting framework in India like IND AS and AS.
Here is a list of 6 reasons why financial reports are invaluable:
- Know how they are performing
- Make smart future plans
- Raise money from investors
- Pay taxes properly
A company drafts data such as sales, costs, profit, loss, cash, loans, and assets in its report. They are based on real data and some readers trust them.
Therefore, finance reporting is much more than writing numbers. It tells the complete story behind a company’s moneymaking.
Importance of Financial Reporting
Financial reporting is one of the most important aspects of any business. This highlights where the money is coming from and going. A business that prepares his report properly earns the trust of those who interact with the company.
Clear and correct Financial Reports are useful due to several reasons. Here are a few key reasons.
Helps in Decision Making
Reports are used by the companies to prepare for future. They see at a glance which product is lagging in profit or how much money they lose. That then guides them to make better decisions.
Builds Investor Confidence
Before investing in a business, investors require financial statements. The documents say if a company is safe to invest in. If we have good numbers, investors will pay attention.
Fulfills Legal Needs
All companies need to report to government agencies. Those reports are useful for filing taxes, audit checks and much more. This is required by law.
Helps in Getting Loans
Before handing out a loan, banks verify financial statements. A report with regular profits, good flow of cash will help banks to sanction the loan faster.
Helps Managers and Staff
Financial reports are used by managers and employees to assess how their departments are performing. Numbers could help them plan better work.
A clear financial report is a breath of fresh air. They assist with few, solve issues, and manipulate cash more greater.
Types of Financial Reports
The financial report has many kinds. And each type provides different types of information. Some depict profits and losses. Others indicate how much cash remains or how many assets a company owns.
Here are the top five types of financial accounting reports that all businesses use:
Profit and Loss Statement (Income Statement)
This report is built on what money a company makes and how much it spends. Income and expenses: Profit or loss is the difference. Also called a statement of operations.
The Three Parts of an Income Statement
- Revenue or Sales
- Cost of Goods Sold (COGS)
- Gross Profit
- Operating Expenses
- Net Profit or Net Loss
The income statement is good for understanding whether the company makes money.
Balance Sheet
A balance sheet is a picture owned by an organization and incomplete on that day. It has three main parts:
- Assets – The building has something (a building, machines, money, etc.)
- Liabilities - How much does the company owe (eg, loan, bill)
- Equity – what the owner has in business This report snapshot of company results and show us called common size income statement.
Cash Flow Statement
Cash — the life blood in any business vein. The cash flow statement tracks what money is coming and going out of a business. It has three sections:
- Operating Activities
- Investing Activities
- Financing Activities
The report also serves as a report card of sorts that ensures the company isn’t burning through its cash and has enough to cover its bills and further develop its business.
The Statement of Changes in Equity Notes
This statement also denotes improvements and declines made in owner’s equity over a specified timeline. This shows the interest of owner in profit, dividend or new investment company.
Notes to Financial Statements
These notes provide additional information to help understand numbers in various reports. For example, if a company has a large expense, the notes will detail what the expense was for. They clarify how money is spent, ensuring you know exactly what different amounts cover, making financial reports easier to understand.
These all are components of the primary types of corporate financial reporting. At the end of each financial year or quarter a company usually compiles all the reports.
Who Uses Financial Reports?
People essentially use financial statements. They use these reports to make choices, resolve issues, and make plans more efficiently.
Business Owners and Managers
They rely on reports as their monitoring tool. They use report data to make decisions, i.e., buying new machines or opening new branches.
Investors and Shareholders
They rely on financial reports when they decide to invest or not to invest. They analyze profit and growth to see if the company is strong.
Banks and Lenders
It is just like banks analyze financial statements prior to lending money. They assess whether or not the company can pay back in time.
Government Agencies
For tax and legal reasons, the government verifies reports. Every year, companies must file financial reports.
Employees
It even allows employees to get a look at reports. If a business does well, workers can receive bonuses or job security.
Different types of financial reports are the basis for smart and safe decisions for all of these users.
Types of Financial Analysis Report
Companies also analyze the reports once they’re made. Thus, these analyses help figure what is going right or wrong in the given business. These reports are known as types of financial analysis report.
Ratio Analysis Report
This report uses several ratios to compare profit, debt, sales, etc., such as:
- Profit Margin Ratio
- Debt to Equity Ratio
- Return on Investment
- Trend Analysis Report
This is an example of the time evolution of numbers. It assists in catching patterns or issues early on.
Comparative Analysis Report
It contrasts today’s reports with yesterday’s or others’ reports. That aids in performance benchmarking.
Common-Size Analysis Report
It converts figures into percentages. This is why making comparisons of companies of different sizes is so easy.
And all these reports are useful for planning, risk management, and profit optimization. They are great examples of business as usual and how a company in the future think.
Financial Reporting Framework Types
When companies prepare reports, they make rules. The rules are referred to as financial reporting frameworks. They advise companies on how to tell the story behind the numbers clearly and accurately.
IFRS – For General Use Under International Framework
IFRS is used by many international companies. It creates simple conditions for international investors to understand reports.
GAAP – Generally Accepted Accounting Principles
This is widely used in the USA. It has robust rules for each report.
IND AS – Indian Frameworks
In India, companies follow these types of financial reporting framework in India. IND AS is applied to significant corporations. Small companies follow AS.
Using the right framework helps reduce mistrust in reports and errors in preparation.
Relevance to ACCA Syllabus
These are the subjects of financial accounting and reporting which lies at the heart of the ACCA syllabus. Students train in the preparation and analysis of financial statements for all types of organizations. This is key to passing papers such as, Financial Reporting (FR) and Strategic Business Reporting (SBR). This theme too encourages audit and assurance learning.
Types of Financial Reports ACCA Questions
Q1: Which statement best represents the financial position of the company at a certain time?
A. Income Details
B. Cash Flow Description
C. Balance sheet
D. Statement of Changes in Equity
Answer: c.Balance sheet
Q2: Does the report capture owner invest as over time
A. Balance Sheet
B. Income details
C. Cash Flow Description
D. Testing balance
Answer: c. Statement of changes in equity
Q3: What report validates the company receiving cash and how much it sends out?
A. Balance Sheet
B. Cash Flow Description
C. Income Details
D. Notes for accounts
Answer: B. Statement of cash flows
Q4: What is Note in financial statements?
A. Original journal entries
B. Internal Audit Conclusion
C. Explanations and more findings
D. Tax audit results
Answer: c. Further details will emerge and provide clarity
Q5: The main framework used for financial reporting in ACCA is?
A. US GAAP
B. UK gaap
C. IFRS
D. IRS code
Answer: c. IFRS
Relevance to US CMA Syllabus
Partly why both sections of the US CMA exam, especially Part 1: Financial Planning, Performance, and Analytics, cover financial reporting as well as its implications in decision-making. Candidates need to have a good understanding of the purpose and structure of financial reports in order to plan, control and analyze operations.
Types of Financial Reports US CMA Questions
Q1: Which of the report management will state / mention evaluate small -deadness?
A. Income Details
B. Statement of changes in equity
C. Balance sheet
D. Audit report
Answer: c. Balance letter
Q2: In the details of cash flow, which activity consists of the purchase of machinery?
A. Operations
B amount
C. Investment
D. Division
Answer: C investment
Q3: Would it help the best in profitability evaluation?
A. Cash Flow Description
B. Income details
C. Balance sheet
D. Reconciliation details
Answer: B. Income details
Q4: How to control costs and performances based on financial report?
A. Historical Report
B budget report
C. Financial statement
D. Trend Report
Answer: D. Trend Report
Q5: What is the primary purpose financial analysis reports serve in the area of management accounting?
A. To file taxes
B. To meet IFRS compliance
C. For strategic decisions supplying
D. To audit journal entries
Ans: C To support strategic decisions
Relevance to US CPA Syllabus
The US CPA Exam deals with the comprehension of all types of financial accounting statements, their preparation, their analysis, and what they mean in audit testing, with the most relevant sections being FAR and AUD.
Financial Report Types US CPA Question
Q1: What financial statement is required by us gap and IFRS?
A. Statement of Income
B. Trial Balance
C. Internal Control Report
D. Budget Forecast
Answer: a. Income Statement
Q2: Which financial statement reflects the changes in a company’s retained earnings and equity during a specific accounting period?
A. Cash Flow Statement
B. Statement of Changes in Equity
C. Balance Sheet
D. Expense Ledger
Ans: (B) Statement of Changes in Equity
Q3: Where interest payments are reported in Cash Flow Statement?
A. Operating
B. Investing
C. Financing
D. Miscellaneous
Answer: A. Operating
Q4: General-Purpose Financial Statements In general-purpose financial statements, for what is excluded according to US GAAP?
A. Number of Retained Earnings – Balance
B. Audit Report
C. Balance Sheet
D. Statement of Cash Flows
Answer: B. Audit Report
Q5. What do US publicly listed companies use to prepare their financial reports?
A. IFRS
B. IND AS
C. US GAAP
D. Tax Code
Answer: C. US GAAP
Relevance to CFA Syllabus
The CFA curriculum, notably Level I and Level II, has a heavy emphasis on financial reporting and analysis. Specifics of financial reports are critical to company performance evaluation, metric calculations insights and global company comparisons across multiple global accounting standards including IFRS and US GAAP.
Types of Financial Reports CFA Questions
Q1: Which of the following is a useful financial report for analyzing the capital structure of a company?
A. Income Details
B. Cash Flow Description
C. Balance sheet
D. Notes for accounts
Answer: c. Balance sheet
Q2: High net income but low cash – anybody explain difference in report?
A. Cash Flow Description
B. Balance sheet
C. Income Details
D. Audit opinion
Ans: A. statement of cash flows
Q3: Where are accounting policies presented in financial statements?
A. Income Details
B. Other information in financial statements
C. Testing balance
D. adjusted account
Ans: B.Financial statements letters
Q4: Which of the following statement represents an entity s profitability during a period?
A. Balance Sheet
B. Income Statement
C. Cash Flow Statement
D. The Economic Situation of the Balance Sheet
Answer: B. Income Statement
Q5: What are common-size financial reports and what are they useful for in CFA analysis?
A. To adjust for inflation, or real dollars
B. To compare firm size
Display items as a percentage of total
D. To adjust for inflation
Ans: C. To present item as a proportion of total
