The accountant is one of the most important roles since the beginning of money. The accountant is a savior or a devil. It depends on various variables. What do accountants do? Why are they so important? Can a business survive without an accountant? These are all arguments that are subject to debate. Our primary concern today is “what accountants do?” and “what they majorly need? To do what they do”. Question 1, what do they do? Accountants run accounts. Sounds a bit cliche. In clear terms, an accountant is one whose profession includes organizing, maintaining, and auditing the records of another. The records are usually, but not always, financial records.
Fact, we just established two main points. Point number one, an accountant keeps accountants. Point number two, the records accountants keep aren’t always financial records. Recall, from our question number 2 we sought to answer the question ” what do accountants need?”. The answer is simple, accountants significantly need financial records. This is not the only need but, plays a major role in financial analysis.
What are financial records? These are primarily the financial statements of an entity or an individual. Now let us buttress on a point. We are considering the financial statement of an entity, popularly regarded as a business. The financial statement is made up of five documents namely:
- Statement of Comprehensive Income and other income
- Balance Sheet
- Cash flow Statement
- Financial Notes
- Statement of Change in Equity
Statement of Financial Position
This is an account statement that shows the summary of a person’s or organization’s assets, liabilities, and equity as of a specific date. It is also known as the “Balance Sheet”. The Balance sheet is subdivided into Assets (Current and Non-current), Liability(Current and Non-current) and Equity.
Statement of Comprehensive Income and other income.
This is a statement that shows the company’s revenues and expenses during a particular period. It indicates how the revenues are transformed into net income or net profit. This statement is also known as ” the profit and loss account” or “the income statement”. The other income statement shows the revenue generated by an entity but not as a result of its core operations. The contents of this statement are Revenue, Expenses and Profit.
Statement of Changes in Owners Equity
This is a financial statement that a company is required to prepare along with other important financial documents at the end of a reporting period. This statement shows the movement of equity or shares in an accounting year. The statement comprises: earned profits, dividends, the inflow of equity, withdrawal of equity and net loss/income.
Statement of Cash flows
This is a statement that summarizes the amount of cash and cash equivalents entering and leaving a company. The statement is broken down into Cash from operating activities, Cash from investing activities and cash from financing activities.
This statement contains the detailed assumptions of the person preparing the financial statements. It provides clarity as to what accounting principle was used to prepare the financial statement.