Financial reporting

What is financial reporting?

A process that a business uses to record, analyse and share its financial activities and performance with internal and external stakeholders.

Why is financial reporting used?

Compliance with legal obligations for tax authorities, regulatory bodies, etc.

Builds trust with stakeholders.

Aids decision-making as they have accurate data to plan budgets, control costs and see long-term strategies.

What does an income statement do?

Measures the business’ performance over a given period.

What does an income statement show?

If a profit or loss has been made by the business.

What is an income statement also known as?

Profit and loss account

How do you calculate if a profit or loss has been made?

Total income - total costs

What does a balance sheet do?

Shows a snapshot of the business’ assets (what it owns or is owed) and its liabilities (what it owes).

Do both sides of a balance sheet equal?

Yes

What is double-entry bookkeeping?

For every debit entry in one account, a corresponding debut entry is made in an another. When both accounts are totalled they equal the same amount.