Financial Reporting Report: Importance of Concepts and Frameworks

This report provides a comprehensive overview of financial reporting, detailing its significance in disclosing a company's financial performance to stakeholders. It explores the conceptual framework, emphasizing its role in effective decision-making and market growth. The report examines key accounting concepts such as going concern, accrual basis, and economic entity, illustrating their impact on financial statements like the balance sheet, income statement, and cash flow statement. It also discusses the monetary unit and periodicity concepts, highlighting their importance in measuring and reporting financial transactions. The report concludes that financial reporting is crucial for providing relevant and accurate data, enabling stakeholders to make informed decisions and maintain a company's financial stability.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................2
CONCLUSION................................................................................................................................3
REFRENCES...................................................................................................................................4

INTRODUCTION
Financial reporting is the disclosure of financial statements to its all stake holders including
internal and external about the performance and business operations of a company. These reports
are basically issued quarterly and annual basis (Nobes, 2014). It used by mangers to make
effective decisions for the company and increase it market growth and stability resulting in the
improvement of its financial position and take competitive advantage over its competitors. This
reports contains conceptual framework in order to make financial reports and also explains the
objective of why accounting is important and how it is done. It also explains the different
concepts which are disclosed in financial reports.
TASK 1
A conceptual framework is considered as an analytical tool with various contexts and
variations which can be applied to various categories of work when overall picture is needed to
take necessary decisions to improve the efficiency of a company and increase its financial
positions and stabilise its growth. The main objective of financial reporting is to provide
information which is used by different users of financial reports. It also provides the information
regarding the cash flow which states the inflows and outflows of cash from the business and
helps the mangers to take necessary decisions and improve the uses of cash in an organisation.
Financial reporting is used by organisation to see its uses of cash and other funds and its
operations and check its progress and growth. Financial statements are made on the basis of
various accounting concepts such as going concern this concept states that a company is a never
ending separate entity which have a perpetual succession (Dyreng, Mayew and Williams, 2012).
According to this concept the company will remain incorporated for more than one year and
keep on going to provide products and services to its customers. The second concept which is
used by companies in making in financial statements is accrual basis this concept say that the
company should record it losses which it may incur in near future and make necessary provisions
for those losses.
Financial reporting includes the various fundamental qualities which states that the
company should provide relevance information about its financial statements. It should provide
relevant information as investors relay on these information before making any investment in a
company. This information is required by various stakeholders who have direct interest in the
business. This information provides actual position of a company. Financial reporting includes
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company’s balance sheet, income statement and cash flow statement. Balance sheet shows
companies actual position of its assets and liabilities which company has to pay. An income
statement gives the information about company’s revenue and expense which a company
incurred during an accounting period, these information shown by these various statement should
not include any false representation as investors and other parties related to the company relies
on these information.
TASK 2
Financial concepts are used by companies to make their financial statements it is
considered as one of the most important concepts following are some concepts which are used by
in order to prepare financial statements
 Economic Entity: economic entity is an organization or a unit within a society such as
an agency or a company (Ball, Jayaraman and Shivakumar, 2012). This is a concept
which states that a business has a spate entity different from its owner. As per this
concept a share capital which is invested by an owner in its business is shown as a
liability in the balance sheet which indicates that the business has to return this amount to
its owner. In big companies the liability side of balance sheet consists of share holders
funds which shows the invested by a business is a liability and a business owe this money
to various share holders.
 Going Concern: This concepts state that the company will continue its operation for
more than one year which means the company will keep on going even after one year. As
per this concept the final accounts which are prepared are prepared on a basis that
company will continue its business in the next year. The owner may change but business
remains constant.
 Monetary Unit: The monetary unit concept is an accounting principle which is used by
the mangers to prepare financial reports which assume that a business transactions or
events are measured and expressed in terms of monetary units and these monetary units
are dependable and stable (Barth, 2013). This monetary unit principle does not concern
with the inflation over the time. It basically deals with the ability to measure the various
transactions in money without any fluctuations. This concept helps mangers to measure
the company’s financial health and prepare its financial reports in quantitative terms and
is easy to interpret.
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 Periodicity: this concept means that the company is complex and an ongoing activity
which can be divided and reported in monthly, quarterly and annually through their
financial statements. For example if a company is involved in a construction business and
is manufacturing a building and it take 2 years for that building to complete but the
activities related to it will be divided into annually financial statements.
CONCLUSION
From the above report it can be concluded that financial reporting is an important concept
which is used by companies for the disclosure of its performance to various stake holders who
have direct interest in company’s business these reports are made on the basis of various
concepts. From the above report it can also be established the objective or preparing a financial
report using various concepts such as going concern, economic entity, accrual basis. This report
also states that the company should provide these reports with relevant data and does not include
any misrepresentation of data.
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REFRENCES
Books and Journals
Nobes, C., 2014. International classification of financial reporting. Routledge.
Dyreng, S. D., Mayew, W. J. and Williams, C. D., 2012. Religious social norms and corporate
financial reporting. Journal of Business Finance & Accounting. 39(7‐8). pp.845-875.
Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Audited financial reporting and voluntary
disclosure as complements: A test of the confirmation hypothesis. Journal of
Accounting and Economics. 53(1-2). pp.136-166.
Barth, M. E., 2013. Measurement in financial reporting: The need for concepts. Accounting
Horizons. 28(2). pp.331-352.
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