Difference between Financial Reporting and Financial Statements, Financial Statements Notes

Difference between Financial Reporting and Financial Statements
Financial Statements Notes

Meaning of Financial Reporting

Basically, financial reporting is the process of preparing, presenting and circulating the financial information in various forms to the users which helps in making vigilant planning and decision making by users. The core objective of financial reporting is to present financial information of the business entity which will help in decision making about the resources provided to the reporting entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided. Financial reporting is of two types – Internal reporting and external reporting. The financial report made to the management is generally known as internal reporting and the financial report made to the shareholders and creditors is generally known as external reporting. The internal reporting is a part of management information system and they use MIS reporting for the purpose of analysis and as an aid in decision making process.

Meaning of Financial Statements

Financial statements are the summarized statements of accounting data produced at the end of accounting process by an enterprise through which accounting information are communicated to the internal and external users.

The American Institute of Certified Public Accountants states the nature of financial statements as “Financial Statements are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the status of investment in the business and the results achieved during the period under review. They reflect a combination of recorded facts, accounting principles and personal judgments.”

In the words of Myer,” The financial statements provide a summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and income statement showing the result of operations during a certain period”.

Difference between Financial Reporting and Financial Statements

Basis	Financial Reporting	Financial Statements
Meaning	Financial reporting is the process of preparing, presenting and circulating the financial information in various forms to the users which helps in making vigilant planning and decision making by users.	Financial statements are the summarized statements of accounting data produced at the end of accounting process by an enterprise through which accounting information are communicated to the internal and external users.
Objective	The main objective of financial reporting is to present financial information of the business entity which will help in decision making.	The main objective of financial statements are to show operating efficiency and financial position.
Process	Financial reporting is process of disclosure of financial results and related information to management and external stakeholders.	Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-related transactions to determine their performance and suitability.
Part	All financial reports are not a part of financial reporting.	All financial statements are part of financial reporting.
Length	A Financial report is much longer than financial statements.	Financial statements are in summarised format.
Format	There is not specific format of financial reports. It is prepared according to the need of the internal and external users.	Financial statements are prepared in a format prescribed under Schedule III of the Companies Act’ 2013.