Financial Accounting Process - Financial Accounting Module

This assignment delves into the core concepts of the financial accounting process. It begins by defining a reporting entity and explaining the importance of general-purpose financial reports, referencing relevant standards. The solution then explores the fundamental characteristics of useful financial information, emphasizing relevance and faithful representation, providing examples to illustrate these concepts. Furthermore, it examines the enhancing characteristics, including comparability, timeliness, understandability, and verifiability. The assignment provides practical examples of how these characteristics are applied in real-world financial reporting scenarios. The student's work demonstrates a strong understanding of the financial accounting process, encompassing reporting entities, financial information, and the characteristics that make it useful.

Running head: FINANCIAL ACCOUNTING PROCESS
Financial Accounting Process
Name of the Student
Name of the University
Authors Note
Course ID

FINANCIAL ACCOUNTING PROCESS1
Table of Contents
Answer to 1:...............................................................................................................................2
Answer A:..................................................................................................................................2
Answer B:...................................................................................................................................2
Answer C:...................................................................................................................................2
Answer to 2:...............................................................................................................................3
Answer A:..................................................................................................................................3
Answer B:...................................................................................................................................4
Answer C:...................................................................................................................................4
Reference List:...........................................................................................................................6

FINANCIAL ACCOUNTING PROCESS2
Answer to 1:
Answer A:
According to SAC 1, reporting entity can be defined as the entity in which it is
reasonable to anticipate that the existing users that are reliant on the general-purpose financial
reporting info to enable them to undertake the economic decisions (Ryan et al., 2014).
Answer B:
The general-purpose financial report can be defined as the means of financial
reporting that is intended to meet the information requirement, which is common for the users
of financial reports. This is because they are unable to command the preparation of reports
that is tailored to meet, satisfy and particularly meet all their financial requirements.
Answer C:
Three main factors in deciding whether the reporting entity exists are
a. Management seperation from economic interest: The bigger the will be the range
of association the better would be degree of separation amid administration and
associates.
b. Economic or political influence: The economic or the political influence refers the
capability of an organisation in creating a noteworthy effect on the wellbeing of outer
parties (Luke, 2016).
c. Financial characteristics: This must consider including the size of value of assets or
the number of employees or the in-debtedness of the entity.

FINANCIAL ACCOUNTING PROCESS3
Answer to 2:
Answer A:
Two fundamental characteristics of useful financial information includes the relevance and
faithful representation.
Relevance:
a. Relevant financial material is competent of creating a modification in the conclusions
that are prepared by the users. Facts might be competent of resulting in variance in
decision making even though particular users might not be taking benefit of it or are
conscious of it that are originating from different sources.
b. Financial evidence comprises of the predictive value if it is put into use as the input to
procedures employed by the users to determine the future results (Huber, 2016).
Financial information does not require prediction or forecast to have predictive value
instead, they are employed by the users to make their own forecasts.
Faithful representation:
a. Financial evidence should not only signify the significant phenomena but should also
be used to authentically characterize the phenomena, which it purposes to present.
b. A comprehensive depiction comprises of all the information that is necessary for the
users to understand the phenomenon being depicted along with the required
description and details.

FINANCIAL ACCOUNTING PROCESS4
Answer B:
There are four enhancing characteristics of useful financial information namely,
comparability, timeliness, understanbility and verifiability.
Comparability:
a. Comparability represents the qualitative characteristics that provides the users to
recognize the likenesses and variances among the items (AASB, 2015).
Verifiability:
a. Verifiability assist the users in assuring that the information faithfully represents the
economic phenomenon that it aims to present.
Timeliness:
a. Timeliness refers to having the information accessible to the decision makers in a
timely manner that are adequate in influencing the decisions of decision makers.
Understandability:
a. There are some information that are generally difficult and not easy to understand.
Excluding the difficult information from the financial report may enable the
information in that financial report easy to understand.
Answer C:
Example of fundamental characteristics:
A reporting entity might obtain the PPE through the government grant. It is obvious
that the reporting organisation acquired the asset at no cost would authentically be
representing its cost however that material cannot be possibly considered suitable.
Alternatively, the importance of an asset being represented faithfully is uncertain. On

FINANCIAL ACCOUNTING PROCESS5
noticing that there are no alternative representation more true, the estimate may offer the best
obtainable information.
Example of enhancing characteristics:
An example of enhancing characteristics include validating the carrying amount of the
inventory by examining the inputs and re-computing the ending inventory by using the FIFO
method.

FINANCIAL ACCOUNTING PROCESS6
Reference List:
AASB, C.A.S., 2015. Investments in Associates and Joint Ventures.
Huber, W. (2016). Irreconcilable Differences? The FASB's Conceptual Framework and the
Public Interest.
Luke, B. (2016). Measuring and reporting on social performance: from numbers and
narratives to a useful reporting framework for social enterprises. Social and
Environmental Accountability Journal, 36(2), 103-123.
Ryan, C., Mack, J., Tooley, S., & Irvine, H. (2014). Do Not‐For‐Profits Need Their Own
Conceptual Framework?. Financial Accountability & Management, 30(4), 383-402.