A company's quarterly and annual reports are basically derived directly from the accounting equations used in bookkeeping practices.
The accounting equation plays a significant role as the foundation of the double-entry bookkeeping system.
The primary aim of the double-entry system is to keep track of debits and credits and ensure that the sum of these always matches up to the company assets, a calculation carried out by the accounting equation.
This statement reflects profits and losses that are themselves determined by the calculations that make up the basic accounting equation.
In other words, this equation allows businesses to determine revenue as well as prepare a statement of retained earnings.
Due to its role in determining a firm's net worth, the accounting equation is an important tool for investors looking to measure a company's holdings and debts at any particular time, and frequent calculations can indicate how steady or erratic a business's financial dealings might be.