Any financial report is a mandatory and very important part of the annual report. Its purpose is to ensure the collection of information on the financial situation of the enterprise, the results of financial activities, any changes in the situation for the year. Such a report reflects the effectiveness of enterprise management.
The data presented in documents of this nature should be clear (give a sufficient idea of the company’s activities), significant (allowing to evaluate the results of work), reliable (without errors, distortions and deviations from the truth), comparable (to determine trends in the efficiency of the enterprise).
The financial report of the enterprise should be prepared in strict accordance with the acceptable deadlines (reports are daily, weekly, quarterly, annual). Financial information has limitations on benefits and costs, that is, the benefits received from its compilation must exceed the costs of this. Reports on cash and cash register are prepared daily, by sales volumes - weekly, monthly, management reports - monthly and quarterly, financial reports - once or twice a year.
The financial report aims to prepare information for its various users. It may be needed by the creditors of the enterprise or suppliers of raw materials who want to find out whether the company is creditworthy. Reporting shareholders and investors learn about profitability; government agents use this data to collect taxes or to regulate the business.
The most important forms of financial reporting are: balance sheet, income statement, cash flow.
The main document - the balance sheet financial report - reflects the accounting balance of assets, capital and liabilities of the enterprise at a particular point in time. It consists of an asset and a liability, which according to the principle of balance should be equal. According to Russian law, balances are compiled for the 1st quarter, one half-year, 9 months, and for the whole year.
Assets are material resources owned by the enterprise and having a monetary value. They are tangible (equipment, raw materials, machinery, etc.) and intangible (ownership of rights). Liabilities are financial debts and liabilities of a company or enterprise. They appear when applying for loans, loans.
To assess the performance of the company, profit and cash flow statements are prepared. First of all, the income statement for a certain period reflects all the income and expenses of the enterprise. This report first sums up revenues (gross sales) and expenses (costs), then the latter are deducted from the former to reflect the net income of the organization.
The financial statement of cash flows provides management with information on all payments and receipts of funds for a specific period. This document helps evaluate the three resulting flows of funds: financial, investment, and operational, explaining where the money came from and what it was spent on.
The preparation of financial statements is the responsibility of organizations and enterprises in the general tax regime. Documents should be systematically compiled and submitted to the tax authorities.
Each financial report of the company has accompanying explanations. They should contain information about accounting methods at the enterprise, a description of individual articles of assets and liabilities, data on the structure of capital of shareholders, information about transactions, off-balance sheet items (options, swaps, forward contracts, etc.). Often explanations provide more information about the financial condition of the enterprise than the reports themselves.