Accounting information is the compilation of various financial transactions in an organization. Business owners and managers use this information to analyze their company’s operations and measure the individual performance of processes, managers and employees. The presentation of accounting information is important because national accounting standards do exist relating to the public disclosure of financial documents. However, some internal accounting reports do not need to follow national standards.
Develop management accounting reports. Management accounting creates internal reports for managerial decisions. These reports commonly list business costs relating to materials, labor, overhead and other information. Management accounting reports are internal and follow the presentation method according to management request.
Use accounting ledgers and journals. Information in these accounting books are presented in financial accounts that only contain information relating to the account, such as utilities expense or office supplies expense. Financial accounts usually include debits on the left and credits on the right in each account. Accounts are also grouped by type, such as assets, liabilities and sales.
Create financial statements. Financial statements present accounting information in a specific fashion so users can understand how well the company operates. The income statement includes all revenues, cost of goods sold and expenses. The balance sheet contains assets, liabilities and retained earnings. The cash flow statement contains a mix of accounts that show the cash inflows and outflows on a company. Information is broken out into cash flow groups relating to operations, investments and financing functions.
Using a standard accounting presentation method allows business owners and managers to compare their company’s financial information to other businesses. This allows company management to determine their performance strength in the economic market.
Failing to properly account for financial transactions can crate distorted accounting information. This can create difficult situations when attempting to secure loans from banks and lenders who cannot accurately assess a company’s financial health.