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Today, we’ll talk about how to use financial reports for decision making in business.
Preparing Financial Reports for Decision Making
Introduction:
Financial reports like income statements and balance sheets provide valuable information that helps business owners, managers, and investors make important decisions.
Preparing financial reports in accordance with Nigerian accounting standards is a critical aspect of financial reporting for companies operating in Nigeria. The Nigerian Accounting Standards Board (NASB) is responsible for developing and issuing accounting standards for companies in Nigeria. The NASB has developed a set of accounting standards that are based on International Financial Reporting Standards (IFRS), but with modifications to suit the Nigerian environment. Companies operating in Nigeria are required to prepare their financial reports in accordance with these standards.
The financial reports prepared in accordance with Nigerian accounting standards typically include the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, and statement of cash flows. These financial reports provide stakeholders with a comprehensive overview of a company’s financial performance and position.
The statement of financial position provides information about a company’s assets, liabilities, and equity, while the statement of profit or loss and other comprehensive income provides information about a company’s revenues and expenses.
In preparing financial reports according to Nigerian accounting standards, companies must ensure that they comply with the requirements of the NASB. This includes ensuring that financial reports are presented in a clear and concise manner, and that all relevant information is disclosed. Companies must also ensure that their financial reports are audited by a qualified auditor, and that the auditor’s report is included in the financial reports. The auditor’s report provides an independent opinion on the fairness and accuracy of the financial reports.
The preparation of financial reports according to Nigerian accounting standards is an important aspect of corporate governance and transparency. It provides stakeholders with confidence that the financial reports are accurate and reliable, and that the company is being managed in a responsible and transparent manner.
By preparing financial reports in accordance with Nigerian accounting standards, companies can demonstrate their commitment to transparency and accountability, and can build trust with their stakeholders. This can help to attract investors, improve access to credit, and enhance the company’s reputation.
Evaluation:
How would a business owner use the income statement to make decisions about future spending?
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