Accounting Explained With Brief History

Running head: ACCOUNTING
Accounting
Name of the Student
Name of the University
Author Note

ACCOUNTING1
Table of Contents
Introduction.....................................................................................................................2
Critical Description of a reporting entity.........................................................................2
Analysis of BINGO Industries Ltd...................................................................................3
Relevance and Representational Faithfulness – An overview.......................................4
Relevance and representational faithfulness for assets and liabilities..........................4
Conclusion......................................................................................................................5
References.....................................................................................................................6

ACCOUNTING2
Introduction
In Australia, most of the entities prepare financial statements to communicate the
information about the entity’s performance. However, one of the most significant
aspects in this regard is relevance and reliability of the information contained within
them. The financial statements can be extremely relevant or can be completely
misleading by hiding necessary information through careful manipulation. Hence, it
needs to be kept in mind that an entity classified as a reporting entity should prepare its
General Purpose Financial Report (GPFR) with great care. This is because there is a
common expectation amongst the users of the financial reports that they are reliable in
nature. They also tend to make their decisions on the basis of the reliability of the
financial reports. Amongst the users of the financial statements are a wide range of
stakeholders of the entity. They include members, shareholders, creditors, investors
and potential investors in an entity. The information contained below deals with the
aspects of a reporting entity and whether an entity can be classified as a reporting entity
or not. Similarly, it takes the example of BINGO Industries Ltd., an Australian entity to
understand the concept of relevance and reliability in financial reporting and whether the
chosen entity is following the same or not.
Critical Description of a reporting entity
In the current scenario, there are a wide variety of interpretations about the
concept of a reporting entity and whether one can be classified as a reporting entity or
not. According to paragraph 40 of SAC 1, a reporting entity is one in which it is highly
probable that there exist users who are highly dependent on the general purpose
financial reports for the process of obtaining information about an entity (Handley,
Wright and Evans 2018). This information will then be used by them in evaluating their
decisions about the entity and in the allocation of the scarce resources available with
them. These GPFRs play an important role in determining the performance of the entity
(Carey, Potter and Tanewski 2014). Hence, there are a set of rules and regulations
guiding them in the preparation of the GFRS. These are known as the accounting
standards and are issued by the Australian Accounting Standards Board (AASB). Apart
from these mandatory guidelines, there are a wide range of concepts contained within
the concept of a reporting entity. One of the concepts is that of a legal entity. This
concept suggests that any entity which has registered itself a legal entity should prepare
its financial reports for the usage of the members and other related parties (Tavadze
2018). Similarly, another concept which is a part of the reporting entity concept is the
concept of accountability. The accountability concept suggests that the elected
representatives and the appointed officials of a company like the Board and the
management have a responsibility towards the public. This information includes, but is
not limited to providing reliable information about the financial performance of the entity
(Draft 2015). There are other underlying concepts within the concept of reporting entity.
The concept of a reporting entity is also related to the needs and demands of the users
of the financial statements. Hence, appropriate information should be provided about
the important financial aspects of an entity. They include the funds available with the