Financial statements are basically the results of an accounting process that can be used as a tool to communicate between financial data or activities of a company with parties with an interest in the company’s data or activities. Financial statements play a broad role and have a position that influences decision making. Additionally, your bookkeeping results affect your decision making as a business owner too. Therefore, we suggest you hire Expert Xero Services so you can get the most accurate bookkeeping data.
Come on, check what are some importance of financial statements:
# 1 Information for Company Performance
Financial reports are needed to measure the company’s business results and development over time and to find out how far the company has achieved its objectives.
# 2 Tax Calculation Information
Based on the income statement generated by the financial statements, the company can calculate the amount of income tax that must be paid accurately for a certain period or can even file tax refunds.
# 3 Company Fund Position Information
Financial statements can produce a balance sheet that can reflect the use of funds in the form of assets and sources of acquisition of funds derived from debt and equity.
The balance sheet is important because it provides an overview of the company’s financial position on a certain date.
# 4 Information Changes in Owner’s Capital
The financial statements produce statements of changes in equity that reflect changes in funding sources, especially those originating from equity.
The company needs a statement of changes in equity to determine the development of capital invested in the company.
High profit does not always reflect the success of the company if the withdrawal of funds by the owner of the company exceeds the profit generated.
# 5 Cash Revenue and Expense Information
The financial statements produce a statement of cash flows that reflects the acquisition and use of its main asset, namely cash.
Management of company funds has a positive correlation with company success. The better cash management, the greater the success achieved by the company.