Maintain Company Financial Accounts
The company’s report or financial statements – shows the totality of accounting, which is reflected in the form of some tables, as well as characterizes the position of the company, on the financial side (enterprise) factory/plant, etc.), for a certain, so-called reporting period, in addition to this, gives an analysis of the movement of property and various liabilities. The company’s financial statements are compiled solely from data provided by the accountant (accounting). Usually, there are only four types of financial statements: Balance sheet: forms liabilities and assets of the company, groups them and expresses them in monetary terms. Statement of changes in equity: provides complete information on the movement of capital, such as: authorized, reserve and additional, as well as changes in the amount of retained earnings/uncovered loss of the company. Report on financial results: shows some of the most important data - is expenses, income, total financial results from the beginning of the year and specifically to the reporting date or reporting period, most often they coincide. Cash flow statement: shows the difference between the outflow and inflow of funds from the company during the reporting period.
Why accounting is Important?
The most important purpose of reporting is to show the state of the company from the financial side, its results, as well as changes in financing for the next reporting period. The financial statements must contain all information about the company’s liabilities, results, assets and liabilities, as well as those circumstances or events that have changed the assets and liabilities or liabilities. This information can be provided to everyone; in particular, it is necessary for potentially interested investors to make any decisions, for example, the purchase of a particular enterprise or shares of this company. Similarly, these data can be viewed by ordinary citizens interested in this enterprise, as well as suppliers, government agencies, creditors, etc., who have a certain interest and want to implement it.
The Rules for Preparing Financial Statements:
The Rule of Objectivity
Reporting must necessarily reflect only true information and the real situation of the company, as well as its Affairs.
Accrual Accounting Rule
In this rule, it is necessary to fix operations connected not only with money, but also sales/purchases on credit, barter (an exchange on equal terms), an exchange of assets/liabilities, etc. It is Important to fix all to one transaction which has at least small monetary potential.
Correspondence Rule
All financial transactions must comply with all parameters that are taken into account on paper.
The Rule of Reasonableness
It is necessary that financial accounting is not clogged with unnecessary information, i.e. many details can be missed, which do not play a big role.
The Rule of Conservatism
One should always avoid including too optimistic information in the reporting, which may not justify itself in the future. It is only necessary to follow a clear mathematical calculation, and avoid excessive emotionality. Financial statements should be clearly and thoroughly substantiated, preferably objectively.
The above-mentioned information helps us to conclude that maintaining financial accounts is very important for a business to monitor and manage its activities that happen daily.