Financial Accounting Process: Key Concepts and Analysis

This assignment solution delves into the core concepts of the financial accounting process. It begins by defining the reporting entity and the general-purpose financial report, emphasizing their roles in providing information for financial decision-making. The solution then explores the primary factors t...Read More

Running head: FINANCIAL ACCOUNTING PROCESS
Financial Accounting Process
Name of the Student
Name of the University
Authors Note
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1FINANCIAL ACCOUNTING PROCESS
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to A:..............................................................................................................................2
Answer to B:..............................................................................................................................2
Answer to C:..............................................................................................................................2
Answer to question 2:.................................................................................................................3
Answer to A:..............................................................................................................................3
Answer to B:..............................................................................................................................3
Answer to C:..............................................................................................................................4
Reference List:...........................................................................................................................6

2FINANCIAL ACCOUNTING PROCESS
Answer to question 1:
Answer to A:
Reporting entity refers to that entity where it is reasonably assumed to expect that the
current users are dependent of the general-purpose financial reporting material, which would
help the users in taking financial related decisions (Jin, Shan and Taylor 2015).
Answer to B:
The general-purpose financial report is referred as the medium of financial reporting
which is anticipated to fulfil the requirement of materials that is common for the financial
statement users (AASB 2014). The reason behind this is that users are not able to order for
the preparation of reports, which are directed to satisfy, fulfil and especially meet the
necessary financial requirements.
Answer to C:
The primary factors involved in deciding whether the reporting entity is existing are;
Economic influence: The economic influence can be defined as the ability of the entity to
make noteworthy impact on the welfare of the outside parties.
Separating management from economic interest: The greater would be the number of
membership the better would be the degree of separation among the management and the
members (He, Evans and He 2016).
Financial features: This should take into the account the value of the assets size, the total
number of employees or the amount of in-debtness of the organization.

3FINANCIAL ACCOUNTING PROCESS
Answer to question 2:
Answer to A:
Relevance and faithful forms the two fundamental characteristics of the useful financial
information.
Relevance:
 The financial report or information consist of the predictive value given the value is
used in the form of input to process employed by the users to ascertain the
forthcoming outcomes (Morris 2017). There is no need of forecast or prediction of
financial information to obtain the predictive value rather the financial users to project
their own prediction use them.
 The relevant financial material is capable of undertaking differences in the process of
decision making that users make. Information may at times be capable of depicting
the differences in the process of decision making though some of the users may not be
able to gain benefit of it or aware of it from the different sources.
Faithful Representation:
 A comprehensive decision consists of all the information that is vital for the users of
financial information to understand the phenomenon that is being represented together
with necessary explanation and particulars (Malone, Tarca and Wee 2015).
 The financial report are not only required to offer the necessary phenomenon but are
also required to be faithful and characterize the phenomena that is purports to present.
Answer to B:
The useful financial information comprises of four necessary characteristics namely
the comparability, timeliness, understanbility and verifiability.

4FINANCIAL ACCOUNTING PROCESS
Comparability:
Comparability signifies the qualitative aspects that offers the users of the financial
report to identify and understand the differences and similarities amid the items.
Verifiability:
Verifiability helps the users of the financial report in making sure that the information
provided is faithful and depicts the economic phenomenon that it purports to represent
(Cheung and Lau 2016).
Timeliness:
Timeliness can be considered as having the necessary information available in the
timely way while making decisions that would sufficiently be adequate in creating an
influence on the decision of decision makers.
Understandability:
Understandability refers to a situation where there are some information that difficult
and uneasy to understand. Barring the complicated information from the financial report may
assist in easy understanding of financial report for users.
Answer to C:
Example of Fundamental Characteristics:
The example defines that Property, plant and equipment may be available to reporting
entity through government grant. Therefore, it is apparent that the entity has not incurred cost
in acquiring the asset and the information cannot be regarded useful. Instead, the significance
of asset represented faithfully remains undefined. On finding no alternative presentation true
the estimation may provide the best available information.

5FINANCIAL ACCOUNTING PROCESS
Example of enhancing characteristics:
An instance of enhancing characteristics signifies verifying the inventory-carrying
amount by investigating the inputs and re-calculating the ending inventory through FIFO
method.

6FINANCIAL ACCOUNTING PROCESS
Reference List:
AASB, C.A.S., 2014. Business Combinations. Disclosure, 66, p.77.
Cheung, E. and Lau, J., 2016. Readability of Notes to the Financial Statements and the
Adoption of IFRS. Australian Accounting Review, 26(2), pp.162-176.
He, L., Evans, E. and He, R., 2016. The Impact of AASB 8 Operating Segments on Analysts’
Earnings Forecasts: Australian Evidence. Australian Accounting Review, 26(4), pp.330-340.
Jin, K., Shan, Y. and Taylor, S., 2015. Matching between revenues and expenses and the
adoption of International Financial Reporting Standards. Pacific-Basin Finance Journal, 35,
pp.90-107.
Malone, L., Tarca, A. and Wee, M., 2015. Non-GAAP earnings disclosures and
IFRS. Accounting and Finance.
Morris, R.D., 2017. Discussion of: The Phoenix Rises: The Australian Accounting Standards
Board and IFRS Adoption. Journal of International Accounting Research, 16(2), pp.155-157.