UNIT
- 1 ACCOUNTING – AN OVERVIEW:
1.
INTRODUCTION:
For
a good accountant and a financial analyst, it is necessary to have understanding
of conceptual basis of the corporate financial statement and corporate financial
reporting system. Even more preparation and presentation of financial statement
is also necessary in this case. They need to consider conceptual issues, major
aspects of financial statements and theory of disclosure. In other words, they
need to be careful for issue relating to the quality of financial statement and
mode of financial reporting.
1.1NATURE
OF FINANCIAL STATEMENT (MEANING):
Financial
Statements are the records of the financial position of a company. It is
prepared by the management of the company with a view to present the financial
performance of the business conducted by them to the owners and the external
parties. The external parties are the parties who are either interested in the
performance of the company e.g. investors, government, tax authorities,
employees etc.
The financial statement
includes:
(1)
Balance Sheet, (2) Profit & Loss Statement, (3) Cash Flow Statement, (4)
Changes in stock holder’s equity, (5) The notes to financial statement, (6) Quarterly
and Annual Reports (in case of listed companies), (7) Prospectus (in case of companies going for
IPOs), (8) Management discussion and Analysis (in case of public companies)
The
Government and the Institute of Chartered Accounts of India (ICAI) have issued
various accounting standards & guidance notes which are applied for the
purpose of financial statement reporting. This ensures uniformity across various
diversified industries when they prepare and present their financial statement.
Characteristics (Features)
of Financial Statements:
- 1) Main
two statements
- 2) Accounting
Principles and Conventions
- 3) Based
on recorded facts
- 4) Personal
Judgments
- 5) Compliance
of Law
- 6) Fair
Accuracy
- 7) Different
Objectives
- 8) Accuracy
in presentation
- 9) Comparison
with previous year figures
- 10Fair
calculation of profit in profit and loss account
Qualitative
features of Financial Statement:
- 1) Relevance
- 2) Reliability
- 3) Understandability
- 4) Consistency
- 5) Comparability
- 6) Materiality
- 7) Timeliness
- 8) Completeness
- 9) Neutrality
1.3 OBJECTIVES OF
CORPORATE FINANCIAL STATEMENTS:
- 1) Particular
Objective
- 2) General
Objectives
- 3) Qualitative
Objectives
1.4 TYPES OF CORPORATE FINANCIAL STATEMENTS:
- 1) Balance
Sheet
- 2) Profit
and Loss Statement
- 3) Cash
flow Statement
2. USES AND USERS OF ACCOUNTING
INFORMATION:
