This document discusses external financial reports, which companies prepare to provide business information to outside parties like potential investors and lenders. External financial reports differ from internal reports in several ways. External reports are conducted annually or interimly for outsiders, while internal reports are ongoing. External reports are audited by appointed accountants, while internal reports are examined internally. The purpose of external reports is to provide a true and fair view of the company's financial position and performance to help stakeholders make informed decisions. They include a statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes to the financial statements.
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What is external financial report
1. WHAT IS EXTERNAL FINANCIAL REPORT ?
Financial report is a formal record of the financial
activities. It is a proof of financial position.
The Companies prepare External
Financial statements to report their business
information to outside observer’s,including
potential investors and lendors.In many cases, a
company external statement don’t differ much
from its internal accounting ;other times,the
difference must be substantial.
2. HOW EXTERNAL FINANCIAL REPORT IS
DIFFER FORM INTERNAL
The internal financial reports are used for internal
management purpose not for public knowledge.but
external financial reports are mainly used for
outsiders or investors who are not involved in day to
day business operations.
The internal financial reports are
conducted throughout the year while external is
conducted interimly or annually.
The last but not least major
difference is internal financial reports are examine or
audited by internal staff or employee. but external
financial reports are audited or examine by outsiders
like CPA OR CA who are appointed by share holders
vote.
3. LEARNING OUTCOMES OF EXTERNAL
FINANCIAL REPORTS.
To gain knowledge about general features of
financial statement.
To gain knowledge about content of statement
of financial position.
To gain knowledge about content of
comprehensive income.
To gain knowledge about changes in equity and
cash flows.
4. PURPOSE OF MAKING FINANCIAL
STATEMENT.
The main purpose of IAS-1 to ensure the
comparability between financial statements of
previous period of an entity. As well as between
the other entities.
Financial statement shows the efficiency of
management. in utilisation of resources and
consistency in performance. which also help to
predict future income.
It describe information about financial position.
And which will help to stake holders for making
right decisions.
5. GENERAL FEATURES OF FINANCIAL
STATEMENT.
Presentation of true and fair view.
Going concern.
Accrual basis accounting.
Materiality.
Comparative information.
6. STRUCTURE OF FINANCIAL
STATEMENT
IFRS apply only to the financial statement, and not necessary to
other information presented in an annual reports like regulatory
filing. or any other document.
The information has to be presented in the best way for easy
readability and better understanding. The standard does not
prescribe the specific format in which information should be
presented.
An entity shall be display following aspects for better and proper
understanding of information.
(a) Name of the reporting entity.
(b) Financial statements are of any individual entity or group entity.
(c) The currency presentation.
(d) Level of rounding off used in presenting the amount of financial
statement for eg. in millions, in thousands etc.
(e) Appropriate heading for pages / notes/ column.
7. CONTENT/ ELEMENTS OF FINANCIAL
STATEMENT
Financial statements Comprises 5 elements:
A statement of financial position at the end. (IAS-1)
A statement of comprehensive income. (IAS-1)
A statement of changes in equity. (IAS-8)
A statement of cash flow for the period. (IAS-7)
Notes containing a summary of significant
accounting policy.
8. 1. STATEMENT OF FINANCIAL POSITION.
The statement of financial position is another
name for “balance sheet”. Before the significant
amendment of IAS-1 this statement was simply
called balance sheet. But after the amendment it
was called a statement of financial position.
PURPOSE: The main purpose of statement of
financial position can be used for number of
financial analysis. such as comparing of debt to
equity, comparing of current asset to current
liability. and it is also useful for wide range of
users for making economic decisions.
9. FORMAT: ASSET = LIABILITY+EQUITY
Assets Liabilities Equity
-Cash - Account payables - Capital
-Accounting receivables - Accrued expense - Retained earnings
-Inventories - Sales tax liability - Accumulated reserve
-Fixed asset - Income tax liability
-Other assets - Debt
We can also categorise asset & liability into current and non current
proportion.
10. CLASS : M.COM –IST SEMESTER
SUBJECT : MODERN ACCOUNTING
SUBMITTED BY : AJAY SACHDEVA (538)
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