A Beginner's Guide to Business Financial Reporting

Analyzing the financial health of a business is important to ensure the company is on the right track. It helps the investors and entrepreneurs benefit from various financial opportunities and avoid the risks involved in making business decisions.

Financial reporting is essential to analyze financial conditions. Even if you are working with an accounting firm in Singapore, you should know the basics of financial management so that you can track the changes in the financial health of the company.

Therefore, this post aims to equip you with the fundamental knowledge of business financial reporting.

1. Balance Sheets

The most basic aspect of every financial statement is the balance sheet. It has a long list of company expenses and also the total sum at the end of the page. The purpose of a balance sheet is to represent the company’s current assets, debts, existing investments, and shareholders’ interests.

Business owners and investors use a balance sheet to evaluate the overall financial conditions of a company to make smart business decisions. Moreover, a balance sheet helps them in getting familiar with the potential financial constraints and challenges.

There are no set rules when it comes to the number of balance sheets created by a company. It depends on the type and scale of the business. Large-scale organizations, especially multinational enterprises, often compile a balance sheet daily or weekly to show the overall profit and loss.

On the other hand, small businesses typically rely on a monthly balance sheet because it is sufficient to evaluate their financial health. If a company chooses to outsource accounting services in Singapore, then professional accountants can make these decisions depending on the specific conditions of the company.

2. Assets

Everything that a business has full ownership of is considered an asset of the company. In other words, assets include cash, accounts receivable, current inventory, prepaid expenditure, and other investments.

Other than the finances, assets can also include the company’s land, buildings, equipment, and offices.

financial report

3. Liabilities

Liabilities are the unpaid debts owed by a company. A business can have multiple outstanding invoices that are not paid to the suppliers. Furthermore, mortgages, credit card debts, utility bills, and other such operating expenses can also be a part of the company’s liabilities.

4. Equity

The equity of a company can be evaluated by subtracting the liabilities from the assets. The most common type of equity is the company’s revenue on the financial statement. Equity represents the book value of the company that shows the total amount a company has in funds in a given period of time.

5. Income Statements

The goal of the income statements is to provide information about the company’s profits during a specific accounting period.

This period is generally on a monthly, quarterly, or yearly basis. It is different from a balance sheet because a balance sheet only represents the financials at a specific period of time, like weeks or days.

Income statements are also known as profit and loss statements. Business owners use these statements to track the revenue and business expenses and make strategic decisions to increase the revenue.

Generally, companies choose to hire professional accounting and audit firms in Singapore to ensure the income statements are prepared in the best way possible.

6. Cash Flow Statement

A cash flow statement is a comprehensive representation of the company’s finances during a specific period of time (accounting period).

It is used to evaluate a company’s ability to keep operating in the short and long term on the basis of the cash flowing into and out of the company.

Generally, there are different parts of a cash flow statement: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

Managers should be familiar with the difference between cash flow and profit to get familiar with the company’s financial situation.

Profit refers to the company’s expenses deducted from the revenue, while cash flow means the cash flowing into and out of business.

Money bag, profit, investment and return, successful business

All In All

These are some of the most important parts of financial reporting that you should know about to easily understand the financial conditions of your company.

If you choose to outsource accounting services in Singapore, you will not have to worry about preparing these documents yourself.

Instead, you can rely on professional and experienced accountants to prepare all the essential financial documents to execute your accounting processes and go through audits successfully.