For every company financial data is an asset, if it is obtained, recorded, analysed and reported in an appropriate manner. It can be obtained through various sources but can be categorised under two broad main headings:
1- Primary data and
2- Secondary data
Primary financial sources of a company are actual records that have survived from the past, such as record from day to day sale book, entries in journal, ledger, financial reports, financial statements, non-current assets register book etc of the company.
Secondary sources are accounts of the past created by people writing about the company’s events sometimes after they happened. These are not direct abstract from one’s own company but rather being obtained and evaluated by other agencies.
Both primary and secondary financial data are very useful for the users; it depends on the interest of different stakeholders. Different groups such as bankers, investors, suppliers and customers, trade unions, regulatory, other non- profit organisations have one or the other way interest in the company. On the basis of this financial information they make material decision in pursuing their purpose. For example, Banks are concern with the liquidity ratios, shareholders with earnings per share etc.
Validity of Financial Data
The validity of financial information depends on the type of user’s groups intentions and their level of interest in the company. Financial information of a company can be internally or externally obtained from a concern company. The Shareholders rely on financial information that is reasonably assured by the external auditors. External auditors of a company more highly trust data that is directly confirmed through a third party for example, confirmations received from debtors about money owed to the company. Similarly bank amount on financial statements confirmed from bank statement or through reception of confirmation letter from the... [continues]
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