Current issue in financial reporting Essay Example | Topics and Well Written Essays - 1500 words

Current issue in financial reporting - Essay Example There are different types of financial statements that are critical in governance and businesses, the most important goal is to manage, control and account for any amount of money that accrue from the business (Alexander & Britton 2014). Financial statements refer to chronological and formal records of business or operational activities of a person, business entity or government departments (Ernst & Young 2014). There are three core financial reports that form an integral part in the financial reporting. Firstly, balance sheet, this settlement gives an organization report on its assets, liabilities and ownership equity at any given time. The goal of this record is to ensure that the management follows systematically the companys state of affairs in managing capital, assets and addressing its liabilities2. It is an integral tool that allows detecting any abnormality in balancing assets and liability and allows for prudent decision-making (Alexander & Britton 2014). It simply shows the financial position of a business in modern accounting practice. Secondly, is the income statement, the purpose of this financial report is to give a comprehensive statement on the revenue collection and expenses? As the number one consideration in financial reporting, it should be prepared within the stipulated time, comprehensive, relevant and reliable. The income statement has an immense importance to stakeholders, managers and government for various purposes. It allows for actual valuation of the businesses (Ishmael 2012). Thirdly, the statement of cash flow is an important accounting, reporting that characterizes the current financial accounting system. It allows managers to know how cash flows within and outside organization (Dunn & Stewart 2014). The two critical uses of this report are accountability of cash within and outside organization3. Secondly, it allows tracing which department consumes more operating costs and more importantly, informs on