0 оценок0% нашли этот документ полезным (0 голосов)
22 просмотров22 страницы
Users of financial statements Owners / investors Management Government Banks and other creditors Employees Cus omers and suppliers. Different types of accounting works involved Reporting: preparation of logical reports and statements - decision making. Limitations financial accounting Historical in nature and reflects the present position Does not reflect the qualitative aspects of business.
Users of financial statements Owners / investors Management Government Banks and other creditors Employees Cus omers and suppliers. Different types of accounting works involved Reporting: preparation of logical reports and statements - decision making. Limitations financial accounting Historical in nature and reflects the present position Does not reflect the qualitative aspects of business.
Авторское право:
Attribution Non-Commercial (BY-NC)
Доступные форматы
Скачайте в формате TXT, PDF, TXT или читайте онлайн в Scribd
Users of financial statements Owners / investors Management Government Banks and other creditors Employees Cus omers and suppliers. Different types of accounting works involved Reporting: preparation of logical reports and statements - decision making. Limitations financial accounting Historical in nature and reflects the present position Does not reflect the qualitative aspects of business.
Авторское право:
Attribution Non-Commercial (BY-NC)
Доступные форматы
Скачайте в формате TXT, PDF, TXT или читайте онлайн в Scribd
Importance of accounting in overall accounting system
It’s to communicate to various users of financial statements the financial positio
n/economic position of the business. Who are the users of financial statements? Users of financial statements • • • • • • Owners /investors Management Government Banks and other creditors Employees Cus omers and suppliers According to Smith and Ashburne Definition of “accounting • is the science of recording and classifying business transactions and events, • pr imarily of financial character and the art of making significant summaries, • anal ysis and interpretations of those transactions and events • communicating the resu lts to persons who must make decisions or form judgements” different types of accounting works involved • • • Constructing: formulation of policy recording: Book Keeping following basic rule s of Accountancy classifying: the process of grouping or sorting of the business transactions to get meaningful information. Done using ledger. summarizing: pro vides a result for the transactions undertaken by the company. (all revenue will give profit or loss) • different types of accounting works involved • Reporting: preparation of logical reports and statements - decision making. The financial statements, budgetary reports etc Interpreting: understand financial m atters and relationships between variables. Ratio analysis, trend analysis, cash flow. Auditing: verification of authenticity, accuracy and correctness of book keeping activity and reports drawn from those records. • • The accounting systems are • Cash system: normally used by charitable institutions, doctors etc, • Single entry system: incomplete books of records which recognizes only cash and personal asp ects and ignores impersonal aspects .eg. Sole-Proprietor. • Double entry system accounting activities • 2. 3. 4. 5. Financial/stewardship accounting: identify financial events/ transac tions, measure them in terms of money (highly successful manager recruited), to organize the data in to meaningful info and to analyse, interpret and communicat e to the various stakeholders. Limitations financial accounting • Historical in nature and reflects the present position • Does not reflect the qual itative aspects of business • Gives only overview but detailed business plans requ ire in depth analysis • Requires accounting knowledge accounting activities • Cost accounting extension of general accounting. Accumulates the costs of certai n activity and gives cost information to the management See the Xerox areas of d ecision making like cost control, identify profitable areas of business (sales m ix). Accounting activities • Management accounting:/ MCS: uses financial and cost data to evaluate the entire business or various departments in relation to pre determined targets For corre ctive action in case of deviation. (differences xerox given) Limitations of management accountancy: • depends on financial and cost data the validity of the reports is dependent upon the historical data. • principle of objectivity is not followed • as is based on in tuition and managers go for short term benefits than the long term ones. Limitations of management accountancy: • heavy on time as its is continuous development of the process • heavy on manpower as the person dealing should have comprehensive knowledge of all accounting acti vities and all subjects like engineering, taxation, statistics etc. Accounting Activities • • Management Reporting It is the process of communicating the right information to the management at the right time and in the right manner for effective decision making. Accounting activities • Income tax accounting preparation of the necessary records required for filing r eturns for tax purposes. For ex. The depreciation shown under financial accounti ng is not acceptable by the income tax authorities Objectives of financial reporting: • to provide information on financial position (Balance Sheet) • to provide informat ion on financial performance (profit and loss ) • changes in financial position( c ash flow) Qualitative Characteristics of Accounting Information relevance • Relevance for decision making and timeliness • Must have predictive capability( is the central of Quality of Earnings concepts) and feed back value • For example if Net income statement gives the investor any idea about the future cash flows ha s feed back value. • Can be used for investing and predicting invt cash flows Reliability • Verifiability implies a consensus among different measurers. • Representational fa ithfulness exists when there is agreement between a measure or description and t he phenomenon it purports to represent EX: “allowance for uncollectible accounts” pr eviously was reserve for doubtful accounts reliability • neutrality is highly related to the establishment of accounting standards. • Accou nting standards should be established with overall societal goals and specific o bjectives in mind and should try not to favor particular groups or companies. SECONDARY QUALITATIVE CHARACTERISTICS • Comparability is the ability to help users see similarities and differences betw een events and conditions • consistency of accounting practices over time permits valid comparisons between different periods. The predictive and feedback value o f information is enhanced if users can compare the performance of a company over time • THANK YOU FOR YOUR ATTENTION AND INTERACTION.