Importance of Financial Reporting♥

source: Google.com

I have been in the corporate world for 30 years and I do believe that financial reporting is not only important to a company but also to us personally.  

Financial reporting lets a company keep track of its assets, liabilities and net worth.  This will help a company to manage their debts which can be beneficial to them especially for their investors and future investors.  It is also important to employees because if a company has a reliable financial report they will have confidence because they know that company has an ability to pay their wages and benefits.

Personal: Financial reporting is not only applicable to companies.  You can also make your own personal financial report, you can keep track of your income and expenses which will help you achieve your goals and be financially free from debts.  

What are the types of  personal financial records?  We must always remember that financial records include everything related to money: bank statements, receipts, investments, mortgage loans, mutual funds, insurance policies and etc.  

The most common and easiest financial report you can prepare is the Income Statement or Statement of Income and Expenses.  

Formula:  Income - Expense = Net Income/Loss

What is Income?  Income is money received, on a regular basis, for work or through investments.  This includes salaries, rent income from properties, income from sale of products and services and etc.

What is Expense? Expense is the money spent for something or the cost required for something, like money used to purchase goods and services, payment to tenant for rent, tuition fee of children and etc.

A reliable financial report, can help you build trust and confidence from it's users : like for example you are handling group event.  A liquidation report is important so that the members of the group will have an idea on how the funds are handled.  Same with if you are handling petty cash fund in your work place proper liquidation is important.  

That is why, financial reports are not only important to companies... personally it can help you track your cash flow, liquidity and net worth... if you have a group project or event this is important because you will gain the trust and confidence of the members... if your into selling (online or not) this is one of the most important thing to have in order to know if you are earning.  :)