Question

You are an accountant in a privately held organization, does this make a difference when you are analyzing the financial reports and if so, in what ways?

Answer 1

A privately held organisation is a corporation held by a small number of shareholders or members. It does not trade its shares in general public on stock market. It includes partnership, sole proprietorship and private companies.
These organizations finances itself through contribution from its members. Many of the privately held organisations don't raise their capital through IPO.
The difference that an accountant will face while analysing financial statements of an privately held organisation are :

The owner of privately held organisation are interested in knowing answers to certain questions such as :

• Is business is generating profits.
• Is expenses more tah income.
• Is cost of production higher than expected.
• Is the finance available to further invest in the business.

Whereas the shareholders of other organizations are interested in knowing about the :

• Turnover of the organisation
• Net profit for the financial year
• Earning per share

The privately held organisations uses basic formula for balance sheet i.e assets is equal to liabilities.

The privately held organisations is more concerned about the business will continue in near future.

Therefore the objective of privately held organisation for analysis are different from other organizations.
So, the accountant has to present and analyise the financial statements differently.

Whereas in public organizations, financial statements are analyised and presented to public in general which forces the accountant to follow various regulations for presentation of financial statements.