Need for Accurate Financial Statements

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Need for Accurate Financial Statements
Presenting a strong, healthy financial picture of an entity or company is crucial in the world of business. In order to present this picture companies use an information system called accounting, which measures the business activity. “The key product of accounting is a set of reports called financial statements.”(Horngren, Harrison, Oliver, p2) These statements report on the entity in terms of money, or in monetary terms in both internal and external controls with all data on the financial statement translating into dollars and cents. The accounting world is divided into two fields; financial and managerial, with each accounting field gathering information to use within the different entities. Financial accounting gathers and shares data for outsiders, such as investors, creditors, and government tax authorities. And managerial accounting gathers and shares data for insiders, such as management, treasurers and other various internal departments, but both fields of accounting need this data to make the best informed decisions for the business. Therefore, it is extremely crucial to keep accurate financial statements since “accounting is the measurement and reporting of financial information to various users regarding the economic activities of the firm” (Russo, 2009), which will be discussed in the following text.

Many components depend on timely and accurate financial statements. Chief executive officers, owners and partners must all examine the financial statements and have a good understanding of them, as well as all internal and external stakeholders, such as employees, suppliers, landlord, bankers, legal counsel, consultants, leasing companies, Federal and State tax agencies, and credit agencies. According to CFO-Services reports “All (parties involved) depend upon and have a vested interest in the issuance of timely and accurate business financial Financial Statements 3

statements, the review of the...
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