Why Accounting Reports Are Crucial

For Developing Businesses?

Accounting is a branch of commerce and it deals
with the study of all recorded financial and
management transactions which have been made by
a particular organization. One of the prime tools
used in this study are accounting reports. Accounting
reports are nothing but files which holds all financial
details of a company’s account records. It is mainly
used to check the financial stability of an
organization and the profit gained by a company and
evolution of the same through a period of time. Each
and every report can vary since they can be brief or
custom-made based upon their respective purpose.
 What are the components of
accounting reports?
An accounting report mainly consists of three
subparts, and they are balance sheets, income
statements and cash flow statements. These three
components of accounting reports are described
below:
 Balance sheets
 Income statements
 Cash flow statements
Balance sheets & Income statements
• Balance sheets:
Balance sheets are mainly used to analyse the
financial stability of a company through its reserves.
In other words, it gives an image of a business’s
present scenario that is, its debts and credits.
Henceforth, it can be said that a balance sheet
describes about the company’s equity.
• Income statements:
The most important part of an accounting report is
income statements. This part gives an overview of
an organization’s sources of revenue and the profit
and loss statements. It also helps to take necessary
steps to make a worsened situation of a brand much
 Cash flow statements
• Cash flow statements:
These are statements usually describes about the
various investments and purchases made by an
organization. This document keeps an accurate
record of the usage of financial sources of a
company.
Accounting web
 What is the purpose of maintaining
account reports?
As can be understood, accounting reports are one of
the most important tools in order to maintain the
stability of a company and achieve higher goals in
future. Apart from this, an accounting report has
several other purposes, some of which are stated
below:
• To make an assessment of a company’s present
financial scenario
• Provide a statement of the total amount of money
that can be invested
• Helps to reduce the risk of unstable investments,
What are the benefits of maintaining
these documents?
Apart from giving an accurate image of an
organization’s financial health and the several
activities related to it, there are several other
advantages of maintaining good accounting reports.
Some of these advantages are stated below:
• Reduce tax-related responsibilities:
Accounting reports helps to remind one about the
exact expenses made by a company. Hence, they
are not bound to pay more than what they have
bought, thereby also reducing the tax amount
attached to those expenses. A person does not have
to stress and fuss about remembering what
purchases he/she made on behalf of a company and
• Gives an overview of an organization’s expenses:
Accounting reports give an overview of a company’s treasury and thereby also states the
amount that can be invested in future, along with whether the company is making a
profit or running on a loss, and how to recover the losses ,a company has already made.
This gives an organization fuel in order to reach its goals by right decision making.

• Additional employment::
An accurate accounting report also helps an organization to make additional
recruitment. Without proper statements a company cannot recruit new employees and
therefore, proper accounting reports are a must.

• Helps to track an organization’s growth:

These reports give a visual representation of an organization’s development since its
foundation via various graphs and statistical representation.
• Helps to create year-ending reports without a hassle:
Creating a year-ending report is one of the most hectic jobs that a person may go
through. However, if an organization maintains precise accounting reports then it
becomes an easier and less time-consuming process for the person who is creating the
annual reports. This may be called as a backup of all monthly financial reports.

• Consumes less time during auditing:

When an organization is going for auditing, an auditor will ask the business head to
provide all the necessary financial documents. If the head is able to produce all these
documents with accurate information then the auditor will take much lesser time in
completing the process.
 How do accounting reports help
developing businesses?
Businesses which are on the verge of development or those
who are going through a stage of development need to
maintain accurate accounting reports compared to leading
companies since they are on the way to make themselves a
part of the globally known business industry.
• A trusted advisor:
The primary source on which an organization works is
financed and in order to maintain this source a company
needs a trusted advisor, and as commonly known paper is
always trusted more than a friend and thereby, these reports
will help a company to make right and needful investments,
recover losses, investment for promotion of the company and
in many more ways.
• Money saving procedure:
As said earlier, accounting reportshelps to save unnecessary
and overinvestment of money which is a very crucial point
which each and every developing business should keep in
Created By :
Lennon John

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