What is the Importance of Accounting Statements?

Accounting statements are those statements that are issued by the financial departments or accounts department of a company and details the expenditure, income, and profit or loss information of the company over a certain period of time. As it is quite obvious from the nature of the accounting statements, they must be factually correct and all the information provided must be thoroughly researched and verified by the concerned authorities. Some important points regarding the use and value of accounting statements are as follows:

  • It is compulsory for an establishment or organization to release accounting statements periodically to ensure transparency. Accounting statements maintain a semblance of order especially in companies that handle large volumes of monetary exchange or traffic.
  • They are extremely useful in determining the reasons for over expenditure or loss of revenue. An accounting statement can provide a thorough analysis of the nature of transactions in a company and thus help cut down losses in the long run.
  • Accounting statements are mandatory in filing for tax returns and applying for insurance. They have several benefits and a well made accounting statement can lend a degree of credibility to an organization.
  • An accosting statements falls under the purview of annual or half yearly or quarterly assessments of all departments of a company. Hence, its role in management and efficient assessments must not be underestimated.
  • An accounting statement also serves to maintain important record as well as documental evidence of transactions, which can be used later in case of any dispute or misunderstanding.
  • It is imperative that in order to manage finances, an individual or a company must prepare some sort of an accounting statement at repeated intervals in order to take stock of their financial situation.

Thus the importance of an accounting statement cannot be undervalued and all effort should be made to create a comprehensive and accurate accounting statement whenever the situation demands one.

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