Importance of Accounting Concepts in Financial Reporting

HA3011
ADVANCED FINANCIAL ACCOUNTING
2019

Contents
Executive Summary............................................................................................... 2
Introduction........................................................................................................... 2
Accounting concepts used by the company..........................................................2
Conceptual Framework and the issue of measurement.........................................4
Fundamental Qualitative Characteristics – Understanding of relevance and
representational faithfulness.................................................................................5
Conclusion............................................................................................................. 6
References............................................................................................................. 7
1 | P a g e

Executive Summary
This assignment aims to provide insights about the importance of use of
accounting concepts and integrating them in a company’s financial reports in
accordance with the accounting standards as prescribed by such regulatory
body. Measurement concepts in financial reporting presented through an
example of an Australian Listed (ASX Listed) company named “Mc Millan
Shakespeare Limited”.
The analysis and reporting made by comparing the past annual reports with the
current year as mentioned in the annual report of the company and analysing in
detail the accounting concepts used and the way qualitative characteristics are
present in the financial reports of the company.
Introduction
In this assignment, all the accounting concepts used by the company in the
preparation and presentation of its financial statements are discussed and
reported in detail.
It includes the fundamental concepts required for any accounting method used
by any type of company in the world.
Some of those accounting concepts are Accrual, consistency and going concern
concepts of accountancy where a company will be required to report its
transactions in the financial reports in such a way the company is going to be for
future years (Axelsen, et al., 2017).
The consistency in maintaining same accounting policies and accounting
estimates over the years reported in the annual accounts of the company. In
addition, any amount or a transaction monetary in nature recorded in
accordance with accrual concept that is not on cash basis. In addition, this
assignment talks about the importance of money measurement concept and the
concept of measurement of money used by the company in its financial reports.
Qualitative characteristics of the entity is analysed to estimate the quality in
preparation and presentation of financial statements to ensure accuracy in the
transactions occurred during the year of presentation of financial reports of the
company (Bowen, 2009).
Accounting concepts used by the company
Based on financial reports of the entity, it is clear that as discussed the
fundamental and required accounting concepts that are consistency, accrual and
going concern maintained by the company in its financial reporting. Going
concern concept of a company requiring to report its transactions in the financial
statements in such a way that the company is going to be for future years.
In this case, of McMillan Shakespeare Ltd, it is clear that the financial reports are
prepared in such a way that they depict the future of business, as there are no
further disclosure nor assumptions that show the management intention of not
2 | P a g e