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Accounting Rules and Concepts - Report

   

Added on  2020-09-03

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Corporate financial statements, their usesand their limitations
Accounting Rules and Concepts - Report_1

TABLE OF CONTENTSINTRODUCTION.......................................................................................................................31.1 Purpose..............................................................................................................................31.2 Aim:...................................................................................................................................31.3 Methodology.....................................................................................................................31.4 Scope.................................................................................................................................31.5 Limitations........................................................................................................................4WHAT IS ACCOUNTING.........................................................................................................4Defining F/S (Financial Statements).......................................................................................4Uses of Accounting Data........................................................................................................4Advantages/ Disadvantages of F/S..........................................................................................4Characteristics of financial statements....................................................................................5Defining 10 Accounting Concepts..........................................................................................6RECOMMENDATIONS..........................................................................................................10CONCLUSION.........................................................................................................................10REFERENCES.........................................................................................................................11
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INTRODUCTIONThe organization need to assess accounting information according to the concepts andprinciples which are provided and guided by the accounting professional bodies. The conceptslike going concern, cost concept, realization concept etc. are essential to exhibit thecorrectness and reliability of the financial statements (Flamholtz , 2012). Without applyingaccounting concepts in practice, firm cannot show their financial statements accurately.1.1 PurposeIn the recent times, all the business units are placing high level of emphasis onpreparing statements with the motive to get information about their financial performance. Inthis, present report will shed light on the accounting rules and concepts mentioned in GAAP,IFRS & IASB. Besides this, the main motive of the current study is to analyze the use,advantages and disadvantages of financial statements. 1.2 Aim:The main objective behind the present study is to assess the significance of accountingprinciples and concept in developing financial statements.1.3 MethodologyIn order to present the fair view of study and attaining aim books, journals as well asscholarly articles which are related to accounting have been evaluated (Yunna and Yisheng,2014). Hence, by using secondary data sources use of accounting concepts in the preparationof financial statement has identified. 1.4 ScopeScope of the present study is wide as it includes several aspects pertaining toaccounting such as IASB, GAAP& IFRS. Besides this, it also presents the extent to whichfinancial statements offer benefit to the firm (Ruggles , 2014). Thus, by using such studyother scholars and business unit can identify the level to which financial statement preparationis vital.
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1.5 LimitationsIn the present study, only theoretical findings are involved pertaining to use, benefitsand drawbacks of financial statements. In this, no figures are involved in relation to specificorganization to support findings which in turn considered as one of the major limitations.However, to resolve such issue examples of accounting concepts have been included. WHAT IS ACCOUNTINGDefining F/S (Financial Statements)Financial statements (F/S) may be served as a formal record of business activitieswhich in turn helps stakeholders in getting deeper insight about the monetary performance offirm. Balance sheet, income and cash flow statement are the main financial statements whichare prepared by business units at the end of accounting year. Besides this, firms also preparestatement of changes in equity to assess or evaluate shareholder’s equity (Delen, Kuzey, andUyar, 2013). Uses of Accounting DataAccounting data is highly significant which provides assistance to the business unit inmanaging monetary performance more effectively and efficiently. Along with this, accountinginformation also helps in creating competent budget or financial framework for the upcomingtime period. Hence, accounting information helps company in taking suitable or profitablebusiness and investment decisions that aid in organizational success. Advantages/ Disadvantages of F/SAdvantages: Financial statements enable firm to evaluate its monetary position andperformance over the years. Besides this, F/S also assists firm in comparing its financialposition over their competitors. Disadvantages: F/S does not provide high level of assistance in developing strategicand competent framework. The rationale behind this, economic and business conditions differsignificantly in each year (Hoyle, Schaefer and Doupnik, 2015). This in turn places directimpact on business policies and competitor’s analysis.
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