Financial reporting is the comprehensive account of all the business transactions, including expenses and income details. It shows the financial position of a firm over a specific period. It can be made quarterly or annually.
It is created to give any business the oversight of its financial dealings and helps in forecasting future requirements. It is the reporting of all the accounting-related information for its users or group of users.
This report is usually released to the public in the form of financial statements for understanding the financial condition of an organization to take further business decisions with that firm. The third parties could be shareholders, customers, creditors, government authorities, etc., who are interested in this report. Making this report is the main function of the controller.
A financial report is prepared in two forms, one for internal use and the other for external people like stakeholders, potential investors, etc.
Any industry, either a manufacturing or a service industry, has multiple departments. These departments may or may not be independent, but they are somehow connected through the link called finance. The accounts department is directly related to them. So, the financial reporting of individual departments is made and sent to various stakeholders.
This reporting can be of two different types-
- Financial reporting made for stakeholders– It contains the list of expenses and income generated from various resources for giving a clear picture to the stakeholders. Based on that, they can make further business decisions.
- Management reporting for internal use– It is made for internal management purposes, for example, profit and loss calculations.