In the realm of financial management, the terms ‘financial reports’ and ‘financial statements’ are often used interchangeably, but in reality, they are two distinct yet related documents. Both financial reports and financial statements are documents used to present financial information to investors, creditors, and other external stakeholders, as well as internal stakeholders such as employees and management. Understanding the differences between financial reports and financial statements is an important part of an effective financial management strategy. This blog post will provide an in-depth explanation of the differences between financial reports and financial statements, and will provide examples of each document to illustrate their distinct roles in financial management.
What are financial statements?
Financial statements are official records of particular types of financial data about a company. Since investors and other interested parties frequently request or anticipate such statements when receiving these reports, business analysts and financial analysts frequently include financial statements within financial reports. Here are a few typical illustrations of financial statements that analysts frequently produce:
What are financial reports?
Financial reports are documents that pertain to a company’s financial health, such as growth, asset, expense, liability, and equity reports. Many of these topics may be included in a financial report that a company produces with the aim of summarizing its overall financial health. Financial reports are frequently produced by business analysts and financial analysts for a specific purpose, such as to present the company to potential investors or to enable business owners to analyze their own company. The following are some typical financial report types that analysts might produce:
Financial reports vs. financial statements
Financial statements are a formal part of a financial report, which is the fundamental distinction between financial reports and financial statements. Business analysts and financial analysts can include a variety of data in a financial report, but each financial statement has a unique format and information requirements. The following are the main distinctions between financial reports and financial statements:
Scope
A financial report contains information on a variety of related topics, as opposed to a financial statement, such as a balance sheet or cash flow statement, which contains information specific to one topic. Put simply, a financial report includes several financial statements. An income statement, a statement of change in equity, and a balance sheet, for instance, could be included in a quarterly financial report.
Formatting
For financial statements, such as a balance sheet, to be presented to potential investors and other interested parties, they must follow a specific format. Assets, liabilities, and owners equity must be broken down into separate sections on balance sheets, with totals listed for each section. However, because report formatting isn’t standardized, financial reports may present the same data in a different way.
Length
Due to the fact that a financial report typically contains multiple financial statements, it is usually much longer than a financial statement. Financial reports should include any information relevant to this objective because they frequently cover the full range of a business’ financial health. Alternately, financial statements could be a succinct document that expresses a specific kind of information pertinent to the financial health of a business. For instance, if all assets, liabilities, and statements regarding equity can fit within that length, a balance sheet may only be a few pages long.
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FAQ
What are financial statements and reports?
The process of financial reporting involves providing information to stakeholders in the business so they can make decisions, and the financial statement is the product of this process. The main distinction between financial reporting and financial statements is this.
What is the difference between financial statements and financial reporting quizlet?
Financial statements (also known as financial reports) are official records of a company, person, or other entity’s financial activities and position.
What should be included in a financial report?
Balance sheet, income statement, statement of cash flows, and statement of changes in owners’ or stockholders’ equity are all examples of “financial statements.” Basic financial statements and any other method of distributing financial and economic data to interested third parties are both considered to be part of “financial reporting.”
