Page 207 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes (v) Reports for External Users: These reports are prepared for the external users who have
interest in the enterprise. They are the shareholders, debenture holders, creditors,
bankers, other financial institutions, stock exchange and the Government. They
may be interested in knowing the financial position, progress made, future-plans
and growth of the company. While preparing these reports, the information regarding
the interest of all the external users should be taken into consideration.

Example: The profit and loss account and balance sheet are prepared every year and
these statements are to be filed with the Registrar of Companies and also stock exchange
authorities.
2. Reports Based on Information: There are two types of information reports. They are:
(i) Operating Reports, and (ii) Financial Reports.
(i) Operating Reports: These reports convey the information regarding the operations of
the business at different functional levels. These reports are used to review and
control the total production and to improve the interdepartmental efficiency.
Operating reports can further be classified as information reports and the control
reports.
 Information Reports: The reports prepared for this purpose should be simple
and clear in respect of various operating activities. These reports are of three
types, viz., trend reports, analytical reports and activity report. In trend reports,
comparative information is provided over a period regarding the direction or
trend of different activities. Analytical reports are based on the horizontal
comparison of results. This provides information in an analytical manner
about comparison of different activities for a particular period. When reports
are prepared for any particular activity of the business then they are known as
activity reports. Segment reports are also information reports.

 Control Reports: These reports are prepared to help the managers in controlling
the operations of the business. Various responsibility centres are established
in every business to have an effective control. To know the performance of
each responsibility centre reports are prepared for them. First important aspect
regarding the performance of the centre manager and the other is concerned
with the economic performance of the centre towards the goal or the business,
are the main features of these reports. These reports can be current control
reports or they can be summary control reports. Summary control reports can
be master summary control reports or these can be subsidiary summary control
reports.
(ii) Financial Reports: Financial reports differ from control or information reports. They
are necessary to know the success or failure of the management’s responsibility to
shareholders through the accounting. These reports can be of two types viz., dynamic
financial reports and static financial reports. Dynamic financial reports show the
changes took place during the year in the financial position of the business. These
reports include report of financial change, financial control reports and effective use
of funds reports. Static financial reports provide the information regarding the
position of assets and liabilities. They include balance sheet and certain additional
statements for individual items of the balance sheet.
3. Reports Based on Nature: There are three types of reports based on nature:

(i) Enterprise Reports: These are the reports, which give a detailed description of the
various operating activities and financial position of the business. They are generally

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