Accounting Reports: When the collected data is processed and manipulated in a useful sense that can be understood by the users without any ambiguity, then it becomes information. When this relevant information is further summarised to meet a particular aim, it is called a report. The contents and the design of the report depend upon the level of management to which it is to be submitted. Various decisions are to be made on the basis of this report. Irrespective of the contents and design, every accounting report must fulfill the following criteria.
- Relevance
- Timeliness
- Accuracy
- Completeness
- Summarisation
Kinds of Accounting Reports
The various types of reports used in MIS can be broadly categorized as follows.
Summary Reports: These are the reports that summarise all the activities of an organization. For example, Trading and Profit and Loss Account and Balance Sheet.
Demand Reports: These are the reports that are prepared at the request and need of the management. For example, Bad-Debts report.
Customer/Supplier Reports: These are the reports that are prepared as per the specifications of the management showing various aspects of the suppliers/customers. For example, Report of Top 10 customers.
Exception Reports: These are the reports that are prepared in accordance with some specific conditions or exceptions. For example, Inventory Status Report.
Responsibility Reports: These reports are prepared by the managers who are responsible for their respective departments. For example, Purchase Manager submits a report regarding different aspects of the purchase.
Designing of Accounting Reports
Accounting reports should be designed keeping in mind the following points.
- Clearly specify the objective of a particular report.
- Its presentation and data contained therein are to be designed in such a manner that it fulfills the exact requirements of users.
- It must contain a query list that defines database manipulation and also help user to do their independent manipulations.
- The report must contain analysis, conclusions, and suggestions at the end.
Also, Read
Interest on Capital
Any interest paid on capital is considered as an expense and is shown in the Profit and Loss Account. Treatment of interest on capital in the final accounts is as follows.
Interest on Drawings
Treatment of interest on drawings in the final accounts is as follows. Firstly, interest in drawings is shown on the credit side of the Profit and Loss Account.
What is Operating Profit?
Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.
Balance Sheet
The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period
Profit and Loss Account
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.
What are Adjusting Entries?
In order to incorporate adjustments in the financial statements, we pass the required Journal entries, which are termed as adjusting entries.