What is Notes to the Accounts

Here we discuss about the topic “What is Notes to the Accounts” and it is the final step of “Steps in the Accounting Cycle”.

Notes to the Accounts are explanations of important points that are necessary for the Financial Reporting of the company businesses. For Example, we show changes in accounting policies in the notes to the accounts’ section i.e. change in the depreciation method.

This step of accounting cycle shows Materiality Concept of Accounting because users of financial statements read annual reports and always go to this section because this section explains the important points of financial statements of company businesses and helps them to make economic decisions.

For the investors (which are one of the users of financial statements), it is very important to read this section to know about the various financial ratios like Profitability Ratios, Liquidity Ratios, Solvency Ratios, etc., of the company for making future investments in the company businesses.