Financial Reports Every company ideally makes and uses financial reports in the process of managing company finances. Because, there are various benefits of financial reports that can be obtain, one of which is the basic material for evaluating a business.
Besides that, there a big bet because managing finances is one of the important points in the company’s operations. If financial reports are not prepar, then the finance division will have difficulty finding track records and managing expenditures and income of funds.
So, how do you make the financial statements in question? Come on, just take a peek at the examples of financial statements below.
Definition of financial statements
Based on the Big Indonesian Dictionary (KBBI), the definition of financial statements is reports related to financial data originating from bookkeeping.
Meanwhile, bas on what was convey by the expert, the definition of financial statements is as follows:
Hope (2013: 105)
Harapanp conveyed that the definition of financial statements is a report that describes the financial/financial condition and results of a company’s operations at a certain period of time.
Indonesian Institute of Accountants (2015)
Based on the Association of Indonesian Accountants in Financial Accounting Standards (SAK) No. 1, the notion of financial statements is a part of financial reporting that is present in a structured manner to convey the position and financial performance of an entity.
So, from the definitions above, the notion of financial statements is a file from the financial reporting section to express the condition and financial performance of a particular entity.
Purpose of financial reports
The purpose of financial reports is to convey information related to the financial position, cash flow and financial performance of an entity that can be useful for stakeholders.
In addition, the preparation of financial reports also aims to provide management accountability for the allocation of resources in the management and operations of the company.
Reports made written and print so that there physical evidence that can later us as company records. So, if one day it is ne again, there is a track record that can be search for and us.
4 Types of financial reports
In a company’s operations, there are 4 types of financial reports that you need to know. What are they? Here’s the explanation:
Balance sheet
The balance sheet is a report that describes the financial position of a company in a certain period of time. Generally, balance sheets are referr to by date, such as “as of April 30, 2021” as of January 1, 2022 “, and so on.
The financial position is divid into two parts, namely the debit which contains the Assets and the credit which contains the Company’s Liabilities/Liabilities. The goal is to understand the total assets, capital and debt of the company within a specified time.
The way to make a balance sheet financial report is to collect data related to company assets and liabilities. The financial balance must be balanc between debits and credits.
An example of a balance sheet financial report is as follows:
Income statement
A profit and loss report is a detailed file/report containing every income and expense so that stakeholders can find out the condition of the company’s profit and loss within a certain period of time. The goal is to understand whether a company is experiencing losses or profits within a certain period of time.
The way to make a profit and loss financial report is to collect data related to the company’s income and expenses. The contents of the income statement depend on the condition of each company. An example of a profit and loss financial statement is as follows:
Cash flow statement
As the name implies, the cash flow statement shows the company’s cash flow in a certain period of time. The goal is to find out how much the company’s cash has increased or decreased in the specified time span. The way to make cash flow financial reports is to record financial flows related to operations, investments, and funding. Example of a cash flow financial report:
Statement of changes in capital
This report shows whether the company’s capital has decreased or increased over a certain period of time. The way to make a financial report on changes in capital is to record the initial capital, additional investment if any, net profit if any, and reduce it by withdrawing capital. Example of a capital change financial report:
5 Functions and benefits of financial reports in business
In addition to the purpose of making the report, there are 5 benefits of financial reports that you can get in running a business. The benefits of financial reports broken down bas on who gets what benefits. So as not to get confus, study the explanation below:
As a company evaluation material
The first beneficiary of financial statements is management. The function of financial reports for management is as a basis for making company decisions and company evaluations. For example, company A has prepared financial reports for April 2021. So, management can use these reports to make a budget for the following month.
For consideration of investment risk
The next beneficiaries of financial statements are company owners/shareholders/investors. The function of financial reports for owners/investors is to measure the level of investment risk in the future.
Make proof of tax compliance
The third beneficiary of financial statements is the government. The function of financial reports for the government is to observe a company’s ability to pay taxes. So, when there a tax obligation to paid, the government can charge the company.
As proof of payment of debt
The next beneficiary of the financial statements is the supplier/supplier. The function of financial statements for suppliers or suppliers is to understand the company’s ability to pay short-term debt.
To see the company’s ability to pay off loan funds
The final beneficiary of financial statements is the creditor or lender. The function of financial reports for creditors/lenders is to determine a company’s ability to pay debts and interest in a timely manner.
Managing money is complicat, but that doesn’t mean it’s impossible. By understanding the benefits of financial reports and studying the various things that surround them, OCBC NISP friends can create a healthy financial system within the company. Enjoy making financial reports!