Accounting Reports

Lesson One: Accounting Reports (this page)
Lesson Two: Income Statement Example
Lesson Three: Statement of Owners Equity
Lesson Four: Balance Sheet Example
Lesson Five: Cash Flow Statement Example
Lesson Six: Other Accounting Reports

In this section we're going to be looking at the various types of accounting reports that are generated by an accountant and the accounting system.

The most important accounting reports are called the financial statements.

Accounting Reports

Remember that the word statement, as used in the term financial statements, simply means a report. So the financial statements are simply financial reports.

The financial statements are prepared from the information in the trial balance. Return to this simple lesson on the trial balance if you would like to brush up on this earlier step in the accounting cycle.

Purpose of Accounting Reports and the Financial Statements

Accounting reports come in various formats and all provide different information. However, they all have one thing in common: they give useful information about a business (or about an aspect of the business) to the reader.

Accounting Readers

The specific stated purpose of the financial statements is to show the reader the financial position, financial performance and cash flows of a business.

The financial position of the business is shown in the balance sheet, the financial performance of the business is shown in the income statement (also known as the profit and loss report), and the business cash flows are shown in the cash flow statement. This will become clearer as you go through each of these reports that comprise the financial statements.

Users of Financial Statements

But here's a question - who are the readers or users of the financial statements? Who are these reports prepared for?

Accounting Scoreboard

Well, the financial statements are like the business scorecard - they show if the business is doing well or not.

The people who want to see the financial statements are the people that are interested in this business scorecard - the guys who want to know how well the business is doing and details about the business income, expenses, assets, etc.

These people, in rough order of importance, typically include:

Business Owners & Executives

1) Business owners - They have the most direct interest in how well the business is doing. The better the business performs, the more money they make.

2) Business executives - Managers (people employed by the owners to run the business) will get fired if the business performs poorly, or get bonuses if it performs well!

3) Investors - Investors are only going to invest in businesses with good scorecards.

The Bank & Government Institutions

4) The bank - They are interested in the financial statements (the business scorecard) of businesses they have a relationship with. For example, they may want to look at the financial statements to see how risky it would be to loan money to the business.

5) The government and tax authorities - They want to know that the business is fulfilling their legal duties, and in particular, that they are paying enough tax! The financial statements give a good idea of how much tax the business should be paying over.

Suppliers & Employees

6) Suppliers - Suppliers want to get paid by the business they are supplying goods to! So they may want to check the financial statements of the business before they even begin to make any agreements to trade with them.

7) Employees - Though this is not often the case, an employee may want to know how well the business is doing so he or she can plan for the future. For example, if the business looks like it might fall apart soon, the employee would probably want to start looking for another job!

Note that the drawing up of financial statements is a compulsory (legal) obligation for public companies - companies that are listed on a public stock exchange. Also, after they are finalized, their financial statements have to be audited (checked by an external auditor). For these companies the financial statements must be prepared once a year, but the company executives may also want them prepared more often for internal and other uses. For other types of corporations such as private companies, it is also customary to prepare the financial statements annually.

Alright, now that we know what the financial statements are, let's take a look at the first of its reports, the income statement (also known as the profit and loss report).

Return to the Home Page

Lesson One: Accounting Reports (this page)
Lesson Two: Income Statement Example
Lesson Three: Statement of Owners Equity
Lesson Four: Balance Sheet Example
Lesson Five: Cash Flow Statement Example
Lesson Six: Other Accounting Reports

Enjoying this Website?
Help Support it with a Donation


Questions Relating to This Lesson

Click below to see questions and exercises on this same topic from other visitors to this page... (if there is no published solution to the question/exercise, then try and solve it yourself)

Accounting Periods
Q: What is the longest period covered in financial accounting? A: Accounting periods are generally one year. I've never heard of it ever being …

Balance Sheet Question
Q: What in the balance sheet shows the owner how well the business is doing? A: There are a number of indicators of business success or failure in …

Accounting for Students Representative Council
Q: Please how do I prepare a financial statement at the end of a session to show how we have spent as the financial secretary? Thanks in anticipation. …


Have your say about what you just read! Leave me a comment in the box below.

Advertise on

privacy policy

Related pages

how to calculate vat from grossbasics of accounting bookvat backwardscompute total manufacturing costsmeaning of ledger in accountingbudgeted income statement formataccrued revenue journal entrythe journal of accountancypersonal profit and loss statement templateprojected income statement examplebanking balance sheet formatpowered synonymnon perpetual inventoryproforma of profit and loss accountdifferent methods of inventory valuationcalculate direct labor costsales ledger samplelifo calculation examplebookkeeping and accounting notesopposite of accrualrent cheap textbooks for collegehow to prepare cash flow statement indirect methoddirect labor cost formulaexplain fifo methodwhat is trial balance in hindihow to compute the cost of goods soldwhat is accrued expensevat formulaslcci level 1 exercisewhat is the meaning of merchandisingretained earninghow to prepare a statement of stockholders equitybookkeeping formulacatering terminology definitionsfrees sampleswhat is the meaning of debitedequation for owners equityfifo method ending inventoryaccounting debits and credits exampleslifo formatwhat is the first step in the accounting cyclelifo perpetual inventory method examplewhat is p&l accountcreditors and debtors definitionsample balance sheet and income statement excelbalance sheet p&laccounting for beginners bookcost of goods manufactured schedule exampledifference between perpetual inventory and periodic inventorycash receipts journalexamples of ledger entries for accountingrevenue and cost equationsbookkeeping journal entriesfoc salesmeaning of ownership in hindiaccountemps excel testhow to record accrued expenseis accounts receivable a credit or debitdefinition of debtors and creditorsthe accounting equation and the balance sheetledger balance meaninggross markup formulaowe in tagalogmeaning of debitedthe accounting for cash discounts and trade discounts arefull form of canara banksales ledger definitionindirect method statement of cash flowsmerchandise inventory accountingweighted average calculator accountingdoubtful antonym