Guiding Principles of Constructing Financial Statements

ASSESSMENT PART 3

 The financial statements are prepared on the principle
that users will be provided with true and fair view of
the financial position and financial performance of
reporting entity.
 The information presented in the financial statements
would help investors to evaluate the position of entity
in generating cash and in assessing their financial
adaptability.
GUIDING PRINCIPLES OF CONSTRUCTING
FINANCIAL STATEMENTS:

 The direct and indirect controls are accounted for
which helps in determining the scope of control of
reporting entity.
 Effect of such transactions will be recognized if the
newly acquired liabilities or assets can be measured in
monetary amount having sufficient reliability (Macve
2015).
 Moreover, there should be sufficient evidence about the
creation of new liabilities or assets along with the
information about existing liabilities or assets.
GUIDING PRINCIPLES OF CONSTRUCTING
FINANCIAL STATEMENTS:

 The basis of measurement can either be at historical
cost or current value in drawing up the financial
statements. Assets or liabilities measuring at
historical costs are initially recognized at historical
cost.
 There should be sufficient evidence about the
transactions related to creation of new liability or
assets
 . Noncurrent assets on other hand are stated at lower
of fair values minus cost to sell or the previous
carrying amount