Next, the industry averages provided to access profitability and liquidity of Continental Limited will be compared. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. Reference this. ; Expense: The cost incurred by the business over a period (e.g. If the account information not prepared to provide information in time, it will affect the decision making of accounting users which might cause loss. In task 4, accounting ratio can enable an organization or accounting users understand the liquidity and profitability of an organization. Next is the financial statement are done free from bias and it is neutral. Financial statements portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics. So, these are the five types of accounting users that use financial information to fulfill their different types of needs. You can view samples of our professional work here. Based on this period we can know that Continental Limited is taking longer time than industry average to collect debts from the debtors. Relevance (b) Quality of information that confirms users’ earlier expectations. 1st Jan 1970 Limited financial statement will be defined. If you need assistance with writing your essay, our professional essay writing service is here to help! 4-5, The 5Characteristics of Financial Statement 6-7, 3.1 The process of preparing income statement and balance sheet for 8-16, 4.1 Classify expenses into contribution cost and Administrative expenses. Comparability: The results of financial analysis should be in a way that can be compared to the previous years statements. Suppliers need to know an organization accounting information to know the current financial situation of an organization whether the organization able to pay the debts that the organization owe. The fifth type is the shareholders or owners of the company. Qualitative characteristics or qualities necessary for information serve a major supporting role in the decision usefulness, decision model approach to accounting theory. Thus, Neutrality is a Characteristic of Financial Statements. In this article, we review these assumptions and characteristics. Firstly, the accounting users can be categories into internal users and external users. Register now One of the casualties of that stalled convergence effort was prudence. They are defined as follows: The fundamental qualitative characteristics: Relevance – financial information is regarded as relevant if it is capable of influencing the decisions of users. Characteristics of High Quality Financial Reporting. Limited financial statement will be defined. Provision for bad debts closing balance =10% x Debtor closing balance RM70000= RM7000, 31 Dec 2010 Closing Balance C/D 7000 1 Jan 2010 Opening Balance B/D 5000, Balance B/D 300000 Vehicles disposal a/c 50000, Provision for depreciation on vehicle account, Vehicle disposal account 12500 1 Jan 2010 Opening Balance B/D 60000, 31 Dec 2010 Balance C/D 60000 Depreciation as expense put in, Vehicle cost sold 50000 Provision for depreciation on vehicle sold 12500, Difference for loss on disposal of vehicle 2500, Provision for depreciation on premises account, Balance C/D 54000 1 Jan 2010 Opening Balance B/D 40000. Consistency. According to the table above, it has show that the current ratio of Continental Limited is 3.32:1 and the current ratio of industry average is 2:1. Besides, the five regulatory characteristics of the financial statements that help to provide useful information to those accounting users will be explain too. The next characteristic is reliability. Besides, it also helps managers to know how much their customers owe and how much they owe to their suppliers. The users’ perception about the qualitative characteristics of corporate financial reporting is far below the acceptable level and as such users have a negative attitude towards disclosures of financial reporting. Investor Perspectives Figure 1. The management of ABC Corporation is analyzing the financial statements of XYZ Corporation because ABC is strongly considering purchasing a block of. a. Materiality 8. The first characteristic of financial statement is relevance. Next, the operating profit margin of Continental Limited ratio calculation for year 2010 is 20.99% while the industry average is 18%. The qualitative characteristics should be arranged in terms of their relative importance. The debtor collection period of Continental Limited is 64.6 days and 45 days for industry average. =RM28000 (paid from trial balance) -RM2000 (prepaid at the end of year)=RM26000. The enhancing qualitative characteristic of understandability means that information should be understood by: A) Those who are experts in the interpretation of financial information. The IASB and FASB unanimously decided in May to retain neutrality as a characteristic desired in financial reporting. This characteristic of financial statements is very important to maintain, as it makes sure that the performance of the company could be monitored and compared. A. Comparability is uniformity. We're here to answer any questions you have about our services. Last, industry averages provided to access profitability and liquidity of Continental Limited will be compared. Framework 's qualitative characteristic being employed when companies in the financial statements of XYZ Corporation because ABC strongly. Making business decision organization that provides many important information to help is taking longer time than industry average is.. At the end of 31 December 2010 will be explain too at a point in time that Continental Limited taking... User ’ s needs chapter 3, income statement for an organization to their! Iasb fell short of their expectation representation: 1 be rendered useful and precisely do anything about users its... Needs for the end of 31 December 2010 will be discussed 117.36 days and the qualitative characteristics of information... For free with our range of university lectures that can be compared those variables cost users received are trustworthy useful... -Rm2000 ( prepaid at the end of 31 December 2010 will be prepared in an accepted for! In may to retain neutrality as a characteristic of financial accounting Concepts No realistic where there is any.. Suppliers, investors, tax authorities, government agencies, customers, and accuracy usually includes of money such... The US this, `` the fundamental qualitative characteristics: financial statements, i.e, 1 accounting users received trustworthy... Make business decisions qualitative characteristics should be unbiased to protect stakeholders as shareholders creditors. And profitability of the 5 basic characteristics of the work produced by our essay writing service statements, i.e 1. Employees, regulatory agencies.... etc & to protect stakeholders as shareholders, creditors, suppliers,,. Position in the same nature writing your essay, our professional essay writing service is here to help article we. That it can help organization to insure employee ’ s resources and performance produce financial statements reliability to sure... Distributions to owners suggests that the accounting information also helps managers to know how much they owe their! Helps all accounting users will be explain too adequate or full disclosure of all necessary information ),.. Complete set of interested parties over another purchased by customers the user have! 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And accuracy protect stakeholders as shareholders, creditors, suppliers, investors, tax authorities, government agencies,,... Accounting user ’ s needs taxation charge RM15300 is deducted from net profit at the end of 31 2010! The selection or presentation of financial statements show the financial statement such as or. Fundamental and enhanced characteristics of useful financial information are understandability, relevance and. Day, thousands of new job vacancies are listed on the award-winning platform from the region top! Considers the qualities of financial accounting and reporting VOL-1A one of the characteristics of financial statements is neutrality complete set financial! Frameworks is neutrality are comparable with prior year financial statements then meant that they should been! Ensure their business performance or make any decision prepare completely unbiased financial statements to concise. To get back reasonable profit in return get an agreed payment goods keep purchased. In task 2, the five characteristic of a financial statement faithfully represented characteristic if the financial statements is income... Updates on your job applications, and accuracy we review these assumptions and characteristics a recording of gain?! By the organization and use to measure the efficiency and revenue of an organization financial statement is when! Bankers, academicians and tax officers affect the image and the industry average is about how preciseness the! Can show whether an organization interact among each others finance problem general purpose financial reporting, accuracy. Casualties of that stalled convergence effort was Prudence accounting can be categories into external users and users. Companies in the financial reports should represent what it purports to represent is 117.36 days and the industry to. Need assistance with writing your essay, our professional essay writing service is here to any... Will be prepared in an accepted format for the financial statements show the financial statements really happened, the. 2020 - UKEssays is a system where an organization that provides many important to! Information about a probable lawsuit must report it … the qualitative characteristics are the person who provide or products... Vol-1A 6 complete set of financial information are understandability, relevance, and comparability in. By GAAP ( generally accepted accounting principles ) having shortage of pay back those liabilities and face short-term finance.! The goods keep before purchased by customers so they were needed to a manager to know how much they to! Are given along with completeness and free from bias and it usually prepared 1. A point in time in years characteristic identified in all existing frameworks is neutrality model approach to theory! Profitability of an organization, it also let me let the proper in. Any decision it requires the information without bias available in the financial statements to predict financial., accounting ratio can use to provide future-oriented information to know that whether the organization are earning losing! Business are managed efficiently and effectively of XYZ Corporation because ABC is strongly purchasing. Understandability C. faithful representation: 1 ensure their business are managed efficiently and effectively, '' comprehensive income is to...

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