Characteristics of Financial Statements – The whole objective of accounting is to systematically record all financial transaction records so that they can be informed to various stakeholders. And the main way this information is presented to related parties is through financial reports.

Below is information about the Characteristics of Financial Statements. So let’s see.

Characteristics of financial statements

Understandable

One of the most important features of financial reports is that they are easy for users to understand. The reader assumes that users have a basic understanding of finance and accounting. So information must be presented in such a way that he understands and is easy to understand.

Relevant

The information must be relevant to the needs of users, that is, when the information influences their economic decisions. This will involve reporting highly relevant information, or information that could influence economic decisions.

Materiality

Materiality is an important point in the audit process. In this case, it is the duty of the auditor to form an opinion based on the company’s financial statements that have been prepared and presented. The magnitude of the value of accounting information which, if misstated or lost, may be able to change and influence decision making.

Reliability

Information must be free from material error and bias, and not be misleading. Accordingly, the information must accurately present transactions and other events, reflect the substance underlying the events, and carefully present estimates and uncertainties through appropriate disclosures.

Honest presentation

Financial report information that contains or faithfully describes all transactions and other events that occur in the financial statements. Such as: balance sheet, must honestly describe all transactions and other events in the form of assets, liabilities and equity that should have existed at the reporting date.

Comparable

Information should be comparable with financial information presented for other accounting periods, so that users can identify trends/models of performance and financial position of the reporting company.

Components of financial statements

1. Profit/Loss Report Part of the company’s financial statements obtained from an accounting period that details the elements of the company’s income and expenses so as to produce a profit or loss. This report consists of income during the current period and expenses, both operating and non-operating expenses during the current period.
2. Report on Changes in Capital Statement of changes in capital / equity is a financial report prepared by a company that describes / explains the condition of the company either in increase or decrease (net assets / wealth) during the period concerned based on certain measurement principles used.
3. Statement of Financial Position It is a financial report that reports the company’s assets, liabilities and equity at a certain time to facilitate analysis in predicting future cash flows.
4. Statement of Cash Flows Is a financial record that contains all income and expenditure information in one period. The use of the cash flow statement is to evaluate the financial structure (liquidity and solvency) and net assets of the company. In addition, the purpose of making this cash flow statement is an adaptive strategy in dealing with changes and opportunities.
5. Notes to Financial Statements Is one of the elements of the financial statements that provide information on explanations / detailed lists / analysis of the value of an item presented in the Budget Realization Report (LRA), Balance Sheet and Cash Flow Statement (LAK) in the framework of adequate disclosure.

Purpose of preparing financial reports

1. Helping companies in assessing the company’s financial condition in a certain period.
2. Presenting comprehensive information / data regarding the company’s financial position.
3. To consider in making important company decisions, especially those related to company finances or company survival.
4. For company credibility. With stable and good financial reports means successful management of the company.
5. Become an assessment material for business owners in fulfilling all of their obligations both in the short and long term.

Closing

So, those are some of the Characteristics of Financial Statements that we can inform you about. If you experience difficulties and ignorance in accounting.

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