What is financial reporting?


Quick Answer

Financial reporting is a written report for the company's managers and investors and government agencies that divulges the financial condition of the company, states TechTarget. It usually includes statements about income, cash flow, shareholders' equity and balance sheets.

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Full Answer

The income, or profit and loss, statement tracks and reports the businesses revenue and expenses, states Entrepreneur. This statements tracks revenue from sales, the cost of the goods or services and operating expenses, such as employee salaries, rent or mortgage payments, and advertising expenses.

The balance sheet lists the business' assets and liabilities, according to Entrepreneur. Assets include cash, accounts receivable, inventory and real estate. It might also include intangible assets, states Entrepreneur, such as non-compete agreements and patents. Liabilities include credit debt, loans and accounts payable.

The cash flow tracks where cash come from and where it goes in the business. This statement is used to help create the income statement and balance sheets. The statement tracks cash flow in the categories of operations, investing and financing, states Entrepreneur. It includes payments towards credit card and loan principals and withdrawals of cash for the owner that are not included on the income statement, explains Entrepreneur. Even though a company may appear profitable on the income statement, this statement might reveal that the company does not have cash readily available.

Finally, financial reporting includes statements of shareholders' equity that track changes in the equity accounts of shareholders, states Accounting Explained. This includes reporting the issue of new shares and dividend payments.

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