Accounting – Statement of Comprehensive Income: Why it is Important to Your Business
Statement of Comprehensive Income, also known as profit and loss statement is one of a deliverable you can expect from an accounting services in Singapore. It can give you an overview of your business’s profitability and the direction the business is taking.
Any organization or individual would want to know where their money goes. A Statement of Comprehensive Income is an effective way of determining the how and where you spend most of your money.
Why is it important to have one?
This document helps an organization or business assess progress by summarizing of business records of profits and losses over a period, which will acts as one of the indicator the management, owners or any other stakeholders of the financial situation rely on. This can either be done monthly, quarterly or yearly (depending on the business preference).
Such records are vital as they help identify items or areas that the company spends most of its resources. Once that is clear, it is easier for the company to work on ways and deliberate on options to minimize or reduce the expenses. For example, if a company spends most on phone calls, an arrangement can be made with the service providers and bargain collectively to get the best deals. Internet calls can also be encouraged and log- ins for calls for accountability on the staff.
For a listed company, this statement improves the transparency of the business as the stakeholders and all public now have access to the financial performance, especially when it is read in conjunction with Statement of Cash flow. With that in mind, profitable investments can be made and thus translates to fruitful investment business. Such a report will also play a significant role in convincing investors to come on board when the need arises.
In loan or funding requirement, most lenders would want to see the Statement of Comprehensive Income alongside the Statement of Financial Position (The Balance sheet) of a company. This goes a long way to advise on the company’s ability to pay back and if the investment is financially viable.
An updated Statement of Comprehensive Income, is one of the source or starting point when it comes to an audit exercise carried out by an audit firm. Crystal clear records make it easier to explain any organization’s financial engagements to auditors without feeling harassed as it often happens.
A Statement of Comprehensive Income enables a business to make accurate and practical projections. Projections are vital in every company it helps the company cushion itself against avoidable losses. Budgeting, which is a crucial practice in every establishment is highly dependent on such a report. Allocations can be made based on the records from the statements.