The financial statements suffer from the following limitations:1. Financial statements include the quantitative information which is expressed in monetary units. They do not provide any qualitative information which may have greater impact upon the decision makers.2. Financial statements record and reveal only the historical data in nature. They do not include any future possible results.3. Financial statements are strictly confined within the boundary of some accounting principles. They are used as the guidelines in recording and reporting the...
Saturday, 31 October 2009
Importance Of Financial Statements
Posted on 21:17 by Unknown
Financial statements are the important sources of information to all the users of accounting information like; management, owners, debtors, creditors, employees, government agencies, financial analysts, etc. The following are the points which highlight the importance of financial statements:1. Financial statements are the summary of information relating to profitability, and resources owned by the firm.2. Financial statements provide the information which can be compared with those of other firms.3. Employees can use financial statements to...
Concept, Features And Objectives Of Financial Statements
Posted on 20:44 by Unknown
Concept Of Financial StatementsPast events and performances serve as background for making projections if they are to be realistic.The financial statements provide important information concerning past financial transactions and their effects om the profitability and the financial position of the business. Various users of financial statements such as owners , investors , creditors , management etc. must make an analysis of financial statements to make right decision. Therefore financial statements are the means of conveying to owners , management...
Limitations Of Accounting
Posted on 20:27 by Unknown
The followings are the main limitations of Accounting.1. Accounting records only those transactions which can be measured in monetary terms.2. Accounting transactions are recorded at cost in the books.The effect of price level changes is not brought into the books with the result that comparison of the various years becomes difficult. For example, the sale to total asset in 2009 would be much higher than in 2002 due to rising prices , fixed assets being shown at the cost and not at market price.3. Accounting statements are prepared by following...
Internal Users Of Accounting Information
Posted on 20:13 by Unknown
Internal users of accounting information are persons related to the organisation itself.1. Owners : Business owners want to know whether their funds are being properly used or not. Accounting information helps them them to know the profitability and the financial position of the concern in which they have invested their funds.2. Management: Accounting information is called the eyes and ears of management.It helps a manager in appraising the performance of the subordinates.3. Employees : Employees of the organisation can get the actual information...
Users Of Accounting Information
Posted on 19:48 by Unknown
The basic objective of accounting is to provide information which is useful for persons inside and outside the organisation.Accounting provides the information to the external and internal users which may base decisions that results in the allocation of economic resource in society.External users of accounting information are those groups or persons who are outside the organisation for whom accounting function is performed.Internal users of accounting information are those persons or groups who are inside the organisati...
External Users Of Accounting Information
Posted on 19:48 by Unknown
Accounting provides the information which is useful for persons or groups inside or outside the organisation.External Users of accounting information :1. Investors : Those who want to invest money in an organisation want to know the financial health of the organisation. They need accounting information which will help them in evaluating past performance and future prospects of the organisation.2. Creditors : Creditors means supplier of goods and services on credit , banks and lenders of money who want to know the financial position of a concern...
Classification Of Accounting
Posted on 19:37 by Unknown
Accounting may be classified into the following types.1. Financial Accounting:Financial accounting is maintained to record business transactions in the books of accounts so that operating results and financial condition for a particular period on a particular date can be known.2. Cost Accounting:The process of accounting for cost which begins with recording of expenditure and ends with the preparation of statistical data is called cost accounting.3. Management Accounting:IManagement accounting is related to the use of accounting data collected...
Functions Of Accounting
Posted on 00:17 by Unknown
Accounting has to perform two distinct functions.1. Historical Function Of AccountingHistorical function of accounting relates to recording , classifying , summarising , analysing and interpreting past transactions. This functions reports at regular intervals to managers , owners and other parties by means of financial statements.2. Managerial Function Of AccountingManagerial function of accounting is helpful in planning future activities of the organisation and in controlling daily operations by comparing the actual results with pre-determined...
Friday, 30 October 2009
Objectives Of Accounting
Posted on 23:57 by Unknown
The main objective of accounting is to provide information about the financial condition of the organisation to internal and external users.Other objectives of accounting are as follows.1. Accounting helps on making decisions concerning more rational acquisition of limited resources through better decision choices.2.Accounting helps for efficient use of available resource through prompt detection of inefficiencies.3.Accounting helps for more equitable distribution of resources.4.Accounting helps to make policy decisions relating to change...
Introduction Of Accounting
Posted on 23:23 by Unknown
Concept And Meaning Of AccountingAccounting may be defined as the systematic recording , summarizing and analyzing of financial transactions and reporting the results.The main purpose of accounting is to show the exact financial condition of the business .Accounting helps to ascertain profit or loss during a specified period.It also helps to have control over the firms property.Therefore accounting is the art of recording and classifying business transactions and events in monetary terms.In the recent years accounting is defined as the art of communicating...
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