We now come to another class of schedules, which, though accompanying a balance sheet, are not so much a part of it as of an annual report. The form of such a report must vary with the nature and size of the business, with various existing legal requirements (as is so frequently the case in reports of English corporations), and with the individuality of the person preparing it.
It goes without saying that a report must be truthful, but truth is many-sided and may be expressed in different ways. In describing the forms for an annual report, therefore, dogmatism as to details must be laid aside, and the following suggestions are made merely to indicate the general requirements of a complete report.
In considering this report it is assumed that the concern reporting is a corporation in which many stockholders are interested, and it is intended that the report shall be sufficiently complete to enable the officers to answer any legitimate questions which may be put at a stockholders' meeting. Apart from this, however, a complete tabulation of a year's results is of value on account of the minute examination of each account which it compels, and which often brings to light matters that have been omitted or overlooked. In addition, a complete report has value in succeeding years as a convenient reference for purposes of comparison; if well prepared, it almost obviates reference to the books themselves.
The basis of the report is, of course, the balance sheet and its accompanying schedules. The report should give any further explanations which may be advisable, should give prominence to points requiring attention, and perhaps contain suggestions for guidance in the future.
The schedules accompanying a report include such statements as the following:
Cash Receipts, classified by months and by sources.
Disbursements, classified by months and by distributions.
Expense accounts of all kinds, analyzed by months.
These statements are particularly illuminating when, in addition, they compare the figures for the current year with those for preceding years.
The preparation of the report of the president or of the directors does not lie with the accounting department, still the report of that department should contain all such information as, in the judgment of the accountant, is necessary to exhibit clearly the business. The duty of an accountant to make suggestions depends almost entirely upon the nature of his engagement and the duties he has undertaken; these vary in the United States according to the wishes of the particular board or of the individual officer through whom the engagement is made.