Accounting is all about financial information —capturing it, recording it, configuring it, analyzing it, and reporting it to persons who use it. The financial statements : The final product of financial accounting is in the form of financial statements that are packaged with other information in a financial report. •Financial statements are prepared at the end of each accounting period. A period maybe one month, one quarter, or one year. •Financial statements report summary amounts, or totals.
There are three main financial statements: –The balance sheet: containing Assets and source of Assets at a specific date –The income statement representing : is the all-important financial statement that summarizes the profit-making activities of a business over a period of time. –The Cash flow statement: presents a summary of the business’s sources and uses of cash during the income statement period. Financial Report :
Financial Report Form: Financial Report must be prepared according to the Standards of GAAP : generally accepted accounting principles for preparing the financial statements, these rules permit alternative accounting methods for some transactions. Furthermore, accountants have to interpret the rules as they apply GAAP in actual situations. The devil is in the details. The point is that interpreting GAAP is not cut-and-dried. Many accounting standards leave a lot of wiggle room for interpretation. Deciding how to account for certain transactions and situations requires seasoned judgment and careful analysis of the rules. Furthermore, many estimates have to be made. Financial Report main components:
The three basic financial statements: income statement, balance sheet, and statement of cash flows. A statement of changes in owners’ equity (if needed). Disclosures: mainly containing Footnotes: and the most important footnote is the one which identify the major accounting policies and methods that the business uses and justifying any change in the policy used. Independent auditor’s report: must be done by independent (from the firm) licensed auditor and give the business a clean bill of health, or that the report is misleading and should not be relied upon. This negative, disapproving audit report is called an adverse opinion.