Most frequent questions and answers
Ans: Financial reporting is the process of disclosing the financial results of an organisation. These reports are used by the shareholders and public for decision making. Financial reports include an income statement, balance sheet and statement of cash flows.
Ans: Financial Accounting is the process of recording day to day monetary transaction of an organisation, whereas Financial Reporting is the process of summarising the recorded data and present the same as per Standard Policies, and the same used for decision making purpose.
Ans: There are mainly 4 types of Financial Statements are used for financial reporting purpose that includes;
a) Balance Sheet – Showing the Asset and Liability position of the business on a specific date.
b) Profit & Loss A/c – Reveals Income and Expenditure for the financial period/year.
c) Cash Flow Statements – Depicting movements of Cash.
d) Statement of changes in Owners/Shareholders Equity
Ans: Financial Reporting usually considered as the final outcome of accounting works done, so it is part of accounting.
Ans: A Balance sheet draws the picture of how effectively a company using their resources. It depicts the asset and liability status of the organisation. A profit and loss account summarises the revenues and expenses incurred during a specific period.
Ans: A Cash Flow Statement is a statement showing changes in the cash position of the firm from one period to another. It explains the inflows (receipts) and outflows (disbursements) of Cash over a period. The inflows of Cash may occur from the sale of goods, sale of assets, receipts from trade receivables, interest, dividend, issue of new shares and debentures, raising of loans, short-term borrowing, etc., The cash outflows may occur on account of purchase of goods, purchase of assets, repayment of loans, payment of tax and dividend, etc.. The cash flow statement comprises information on operating activities, investing activities and financing activities.
Funds Flow Statement states the changes in the working capital of the business in relation to the operations in one period. The main components of Working Capital are Current Assets and Current Liabilities. Funds flow statement explains the various sources from where the funds generated with various uses to which they are put.