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Definition, Function, and Type of Financial Statements

For business people, of course, they are very familiar with the ins and outs of financial statements. This is indeed very important, because the good or bad of a report will be a determining factor for the sustainability of your business. For this reason, making a report cannot be done as long as it needs a good level of competence and competence.
Definition of Financial Statements
The definition of financial statements according to Financial Accounting Standards or SAK is a part of a complete financial reporting process, which consists of a balance sheet, income statement and a report on changes in financial position. So through this report the business can see quantitative information regarding the company's financial condition and the changes it achieves in a certain period.
In addition, a report related to corporate finance can also be used as a medium to see the condition and financial position of the company as a whole and analyze the future of the company later. From this definition, it can be concluded that financial statements are information that records all business transactions over time so that it can provide an overview of the achievements and economic conditions of a company.
Function of Financial Statements
For a company the function of financial reporting is very important. The first function is to find out the position of the company and control it. After knowing the general description regarding the company's financial condition, management will find it easier to consider the next step.
The function of the second financial report is for consideration of planning company activities. In addition to containing financial information, a report on the condition of the company also describes the company's ability to do a job, which can then be used as a consideration in planning an activity that is in accordance with the company's financial condition so that it does not suffer losses in the future.
The next function is as a basis for making decisions related to the company. We can see this third function from the two functions above which are basically as a basis or consideration to plan or decide on an action to be taken. All of which aim to ensure the progress and development of the company in a better direction.
And the function of the last financial statement is for consideration and accountability for external parties. As we know, companies can progress and develop if they have many investors. Investors will always monitor the condition of the company from the reports provided. This is where the function of financial information, in addition to being responsible for the investment they receive can also be a consideration for other investors in disbursing their funds.
Types of Financial Statements
There are 4 types of financial statements that you should know, the first type of report is a Balance Sheet which is a tool used to measure a company's financial position consisting of assets and liabilities. The second type of report is the income statement. This report presents all details related to the income the company has and the expenses incurred during an accounting period in the company. From this report you can find out how much loss or profit the company is getting.
Next is a report on changes in capital, namely the type of report that presents every information related to changes in a company's net assets that occur in an accounting period that are affected by profits and losses and transactions of the owners of capital.
And the last type of financial report is a cash flow statement, which contains information about all cash inflows and outflows related to all the company's operational needs in one accounting period.
Description: Financial statements cannot be separated from compulsory corporate activities which aim to get information related to all financial activities that occur in a company in one period.

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