Financial Reporting Process

 Financial reporting process is the process of

producing statements that disclose an
organization's financial status to management,
investors and the government.

 The major objective of financial reporting is to

track, analyze and report your business' income and
to examine resource usage, cash flow, business
performance and the financial health of the business.
This helps you and your investors in making informed
decisions about how to manage the business.
 Financial Reporting Process
 Financial reporting includes the following: the
external financial statements (income statement,
statement of comprehensive income, balance
sheet, statement of cash flows, and statement of
stockholders' equity) and financial information
posted on a corporation's website.

A financial statement is the combination of the

three major reports on a business. It will contain
the cash flow statement, the income statement and
the balance sheet of the business.
 Financial Reporting Process
 Internal Control
Internal control, in accounting, can be defined as a process
for assuring of an organization's objectives in operational
effectiveness and efficiency, reliable financial reporting,
and compliance with laws, regulations and policies.
OR
A company's internal control over financial reporting is a
process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles.
 Financial Reporting Process
 Audits:
A systematic and independent examination of an
organization’s accounts.
OR
Audit is the examination of an
entity's financial statements and accompanying
disclosures by an independent auditor.
Similarly, lenders typically require an audit of
the financial statements of any entity to which they
lend funds.
 Financial Reporting Process
 Annual reports:
An annual report is a comprehensive report  on
a company’s activities throughout the
preceding year. Annual reports are intended to
give shareholders and other interested people,
information about the company's activities and
financial performance.
GAAP (generally
accepted accounting
principles) is a
collection of
commonly-followed
accounting rules
and standards for
financial reporting. 
GAAP LEADS TO:
 BALANCE SHEET
• The balance sheet is one of the 3 fundamental financial statements and
is key to financial accounting. The balance sheet displays the company’s
total assets, and how these assets are financed, through either debt or
equity. It can also be referred to as a statement of net worth, or a
statement of financial position. The balance sheet is based on the
fundamental equation: 
Assets = Liabilities + Equity.

• This statement is a great way to analyze a company’s financial position.

An analyst can generally use the balance sheet to calculate a lot of
financial ratios  that help determine how well a company is performing,
how liquid or solvent a company is, and how efficient it is. Changes in
balance sheet accounts are also used to calculate cash flow in the cash
flow statement.
 Balance Sheet
• Assets: Economic Resources owned by a business &
are expected to benefit in future operations.
• Current Asset: Assets having live of “less than 1 year”
• Fixed Assets: having live of “more than 1 year”

• Liabilities: Liabilities are debt.

• Owner’s Equity: Owner’s equity in business

represents the resources invested by the owner.
The Accounting Equation
 ACCOUNTING
PRINCIPLES INVOLVED
IN
ASSET VALUATION
 ASSET VALUATION
• Asset valuation is the process of
determining the fair market or Present
value of assets.
• Asset valuation can be done on the basis
of Cost or Market value.
• GAAP supports asset valuation in balance
sheet at COST basis.
 Income Statement
• An income statement or profit and loss account (also referred
to as a profit and loss statement (P&L), statement of profit or
loss, revenue statement, statement of financial
performance, earnings statement, statement of
earnings, operating statement, or statement of operations)  is
one of the financial statements  of a company and shows the
company’s revenues and expenses during a particular period.
•
It indicates how the revenues are transformed into the net
income or net profit (the result after all revenues and expenses
have been accounted for).
 Income Statement
• The purpose of the income statement is to
show managers & investors whether the
company made money (profit) or lost money
(loss) during the period being reported.
 Statement of O.E
• The statement of owner's equity is a
financial statement that reports the changes
in the equity section of the balance sheet
during an accounting period. In other words, it
reports the events that increased or
decreased stockholder's equity over the
course of the accounting period.