As explained above, for sound decisions to be made at whatever level; be it the public sector, private entities or multinational corporations, a financial report must be submitted. For there to be a good financial report, methods of accounting and other importance principles must be observed. A good public accounting system sets pace for the profit oriented firms and therefore, ensures regulations are followed both in the accounting principles and the financial reporting field.
Relevance of the two Disciplines
Increased globalization of financial and product markets have raised the interest of both market participants and regulators in the quality of financial reporting and public accounting worldwide (Deloitte, 2008). Efficient public accounting and financial reporting are conducive to the financial sector development and also the private sector development, which in turn stimulates economic growth. Financial reporting in government can be viewed as a summary of the government's performance, or capacity, in raising, handling, and using public money. Financial reporting goes hand in hand with accountability. Sound corporate financial reporting systems should not be viewed as the core objective for their own sake; they are the foundation of a well functioning market economy and a healthy financial system. In principle, one of the major objectives of financial reports is to assess financial achievement, conditions, and fulfillment of the funds and other accounting requirements. With such information, one probable benefit of financial reports is to assist people make better judgments about the community, the government, and the economy. In public accounting, the size of profits does not provide an effective measurement for evaluating performance of the public sector in question. The role of public sector accounting system should be determined in accordance with the needs of its users (Arnould, 1972). Public accounting aims at establishing ground level for all interested entities; private or profit making firms. The sector, therefore, establishes a good public governance system.
History of Financial Reporting and its evolution
Financial reporting is a process of disclosure of the internal and external status of a business. Its function is to make the public aware of issues concerning stewardship (Deloitte, 2008). This includes resources that the business runs with and the results of their use in the past. It also serves to disclose the management plan, and how previous mistakes can be avoided. This serves to attract investors. In the manorial period, financial reporting was for internal periods, since most businesses were owned privately and investors were not needed.
Back in the historical times, businesses and the general market would suffer as a result of improper record keeping methods, financial reporting being one of them. Financial reporting has evolved over the years, from simple records to detailed and directive methods; we can call it a system (Balkaran, 2002). Development of the capital markets and new financial information users could not match with the poor state of financial reporting. Therefore, it demanded proper, systematic and descriptive financial reporting (Arnould, 1972). The aim of the new system was mainly to provide both the capital management and the businesses themselves with an easy way of evaluating and analyzing capital.
The Manorial Period
Manors were the centers of rural employment in the thirteenth century. They were managed well, and they had well kept financial reports though, not in an advanced way. Efficiency was obtained from the computation of profit or loss. Despite the simple methods of computation, they had well organized administration, just like that of the individual capitalism. Well skilled men and business intellectuals were in charge. This shows that organized management is not new; only the methods of governing and reporting have changed (Ashley, 1912:271). However, financial reporting is not an issue of profit and loss any more. Business intellectuals have observed that other business entities require calculations, serving to outline the status of the business in a more elaborate angle, which serves to induce an elaborate decision making process. This lack of proper orientation made the running of the businesses hard. The businesses tended to be stagnant and regressive. Profits and losses could not help businesses to assess what they needed and what their strength was.