Purpose of an Annual Accounting Report
An annual report is a yearly publication that presents a company's accounting and finances. The report is often written by the company's accounting department or lead accountants, as they have access to the company's entire accounting system and records. The purpose of an annual report depends highly on the person reading it.
Other People Are Reading
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Identifying Budget Issues
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Annual accounting reports identify issues with the overall budget. This mostly includes identifying areas where the company needs to make budget cuts in order to avoid or cut excessive monetary spending. These budget cuts or arrangements can include anything from cutting down on business dining trips or travel expenses. Each company will have different expenses that can be cut and altered, so the issues depend solely on the budget in question.
Identifying Sales and Earnings Patterns
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An annual accounting report will also show readers how much the company is making in terms of monthly and annual sales. This is often shown as a collective sum and broken down in detailed charts, if the company is selling various products or services and wants to see how the products are doing individually. This type of breakdown allows readers to see what products are best sellers and which products are not selling as well. This information is used to decide whether to cut products from the company's selection or expand the product line.
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Informing Investors
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Investors, shareholders and stockholders are often interested in how the business is handling money if they financially own part of the business. These key players in the business often want to see the financial figures that identify the company's net worth. Most investors want know if the business is spending more than it is earning and what is being done to get a monthly profit, if this is indeed the case.
Legal Duty
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Depending on the business structure registered with the state's office or county office, state laws may require a business to turn in an annual report. This is so the state can see how the business is operating. This is particularly relevant to corporations and partnerships. Sole proprietors are not required to write an annual account report but can do so for personal records. Check with the Secretary of State in your state in order to determine whether an annual accounting report is required of your business.
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References
- Photo Credit business report image by Christopher Hall from Fotolia.com
