Question

What will determine how often you generate reports?

Answer 1

There are number of factors which should taken care of for determining the frequency of generation of financial reports :

1. Nature of the entity: if it's sole proprietorship or partnership, owners have complete control on its management. They may not need formal reports frequently. Once in a year is sufficient. However in case of corporate entity, management and ownership are different. Shareholders should provided information through monthly or quarterly reports as well as interim partial reports along with annual reports.

2. Internal and External Demands for Information:

Banks, investors, internal constituencies, managers, shareholders, vendors and others with a stake in a company may require a reports on a more frequent regular basis. There are many decisions which are related to human resources and other areas that are taken on the basis of both actual and projected net income. Corporate entities are bound by law to produce and distribute quarterly and annual reports to shareholders including profit and loss statements.

3. Tax Anticipation and Reporting:

One of the requirements of profit and loss statements or reports to anticipate and pay taxes of different kinds. Most of them are required to be paid on quarterly basis.

4.Changes in Market Forces or Business Climate:

Market forces and business climate are subject to change more frequently and this induces companies to prepare reports more frequently to inform stakeholders regarding change in strategies.

5. New or Established Company or Product: if a company is new or has introduced new product or service, then it has different needs for disclosure of revenue and expense information compared to established company with products and services. Thus, these companies requirement for preparation of report is more frequent compared to established one.