The main objective of financial reporting is to provide financial information to current capital provides to make decisions. This information might also be useful to users who are not capital providers. The general purpose financial reporting develops superior reporting standards to help in the efficient functioning of economies and the efficient allocation of resources in capital markets. General purpose financial reporting focuses on an extensive range of users’ needs that lack the ability to obtain financial information needed from the entity. It should be broad enough to comprehend information for the various users. Therefore, the financial report is where they depend on to acquire information. Diverse users may require different information which might go beyond the scope of general purpose financial reporting. The financial reports are prepared from the entity’s perspective (deemed to have substance on its own, spate from that of its owners), instead of the entity’s capital providers. Continue reading
Accounting Concepts
Management Accounting – Definition, Objectives, Scope and Limitations
DEFINITION OF MANAGEMENT ACCOUNTING Management accounting is not a specific system of accounting. It could be any form of accounting which enables a business to be conducted more effectively and efficiently. It is largely concerned with providing economic information to mangers for achieving organizational goals. It is an extension of the horizon of cost accounting towards newer areas of management. Much management accounting information is financial in nature but has been organized in a manner relating directly to the decision on hand. Management Accounting is comprised of two words ‘Management’ and ‘Accounting’. It means the study of managerial aspect of accounting. The emphasis of management accounting is to redesign accounting in such a way that it is helpful to the management in formation of policy, control of execution and appreciation of effectiveness. Management accounting is of recent origin. This was first used in 1950 by a team of accountants visiting Continue reading
Objectivity in Accounting
Financial accounting can be defined as a process of designing and operating an information system for collecting, information in order to make financial decisions. It is said to collect accurate financial data and other financial information, and to accumulate and combine it in an organized and systematic way, according to the principles and rules of accounting, for reporting purpose. Financial accounting is objective in the sense that it is not biased which means it is true and fair in review. It is very importance for any organisation because the information gathered through financial accounting can be used to make financial or economic decision making. One of the purposes of financial accounting is to provide information about the performance of the company to external people as well as internal managers within the organisation. The external people can be in form of stakeholders, creditors, suppliers, tax authorities etc. The financial information gathered Continue reading
The Importance of the Conceptual Framework for Accounting
An accounting framework is a coherent system of inter-related objectives and fundamentals that should lead to consistent standards that prescribe the nature, function and limits of financial accounting and financial statements. The main reason for developing a conceptual framework are that gives a framework for setting accounting standards, a basis for resolving accounting disputes and fundamental principles which then do not have to be repeated in accounting standards. Furthermore, Conceptual Framework can be categorized in terms of the distinctive function of management accounting within the management process in organizations. Moreover, the way in which the utility of the outcomes of the management accounting process can be tested. Conceptual Framework is a criteria which can be used to assess the value of the processes and work technologies used in management accounting and capabilities necessarily associated with the effectiveness of the management accounting function overall. Conceptual Framework plays an important role in Continue reading
What is a Fixed Budget?
A budget can be defined as a management tools that put the managers in control of a financial health of the organisation. The objective of the budget is to measure of the financial structure of the organisation and budget is a tool that forces management to be accountable in a structured and objective way. How manager manage the budget is key to their value. Budget facilities the planning and resources allocation and help to estimate, itemized, analysis and examined the entire product and service that organisation offers to customer. Budgeting is a simple process of consolidating budget and adhere them as closely as possible. It is a process turns manager attitudes forward looking to the future and planning; managers are able to anticipate and react accordingly to the potential problem before it arises. Budgeting process allows manager to focus on the opportunities instead of figuratively. The aim of budgeting is Continue reading
The Future of Accounting Profession
In today’s business environment professional accountants are directly responsible to their customers, companies and to the society and also they should know possible legal obligations to the stakeholders. Accounting profession is not only limited to preparing accounting statements but also involves in wide variety of functions which provides inputs to the managerial decision making. If an accounting professional is not able to perform his duty and responsibilities in satisfied level according to the universal standards it is the major liability in the hands of an accountant. Compared to other type of professions this profession has its own code of ethics hence it is dignified and respective profession which provides practical inputs for the effective decision making. In the context of professional accounting, the power and responsibility of an accountant can be justified when financial statements provides expected information according to the objectives functions especially protection of public and social interest. Continue reading