Qualitative Aspects of Financial statements

Task-1
Qualitative Aspects of Financial statements
Two fundamental qualitative
characteristics
 Relevance
Faithful representation
Four Enhancing qualitative
characteristics
Comparability
Verifiability
Timeliness
Understandability

Relevance Faithful representation
The recognition norm of any compo
financial statement i.e. Account bala
class transaction. is fulfilled or met,
record the component in order to be
user who is actually depends on info
showing in financial statement.
Faithful representation has three at
complete, neutral and free from err
•complete includes all fact and figur
for a stakeholders to understand, in
every necessary explanations and d
• Neutral is without biasness in the
presentation of financial informatio
the financial statement.
•Free from error means without err
omissions. However, it does not mea
accurate and complete in all respec
•When fiscal amounts in financial in

 Both the above Fundamental qualitative characteristics provide
different approach in presetting the Financial reporting and the
information shown in financial statements could be provided in such a
way which can depict its real term without getting being into difficulty
and complexity. Suppose, Fire broken out into factory at the time of
closure of the books but before issuance of financial report, could be
really important for the stakeholders to know about the expected
impact on the upcoming or subsequent performance of the business
and sentiment of the shareholder. On the another hand, estimate of
such loss would also be required to be calculated, at the time of signing
or approving of financials. So, both are equally important component of
financial statement.
 In few cases, a trade-off between the fundamental qualitative
characteristics required to be made in with respect to achieve the aim
of financial reporting, which is to give important useful fact and figures
about economic activity. For instance, the most important information
about a company activity can be a highly uncertain estimated figure. In
some instances, the occurrence level of measurement figure with
uncertainty involves that the estimate may be so high and reasonable
that it can provide question whether the estimate would provide a
sufficiently faithful representation of that fact and figures.
.

Task-2
Positive Accounting Theory attempt to make forecast of real possible
world events & turn them to accounting fact and figure i.e. perhaps
how different users will react to particular accounting disclosures
In the given fact
Profit and loss accounts
(In millions)
Expenses Income
Total exp. 100 Gross profit 189
Net profit 89
Balance sheet
(In millions)
Liability & Equity Asset
Equity and reserves 100 Total Assets 440
Loan 340
Total 440 Total 440