...THE IMPORTANCE OF FINANCIAL STATEMENTS TO SHAREHOLDER. * To educate shareholder A company’s financial conditions would be the major concern for shareholders. As a capital providers, shareholders depends on the company’s financial statements for knowing the company’s financial conditions each for both safety and profitability of their investments. Moreover, shareholders need to know where their money went, how it is spent and where is it now? The financial statements especially balance sheet confirms such query by providing specific information about a company’s asset investment. Thus, this will be educating the shareholders of Kenny Rogers in which how did they use the investment capital to earn revenues. * Shareholder’s equity care The financial statements, especially statement of shareholder’s equity exhibit an important information to shareholder because of the alteration in various equity components beginning with the starting capital and the events that made it increase and decrease. Ending components exhibits the company’s net worth. A fluctuating growth in a firm’s shareholder’s equity by way of decreasing the retained earnings, as opposed to smaller shareholder base. This means the reduction of investment returns for current equity shareholder. * Performance indicator Shareholder’s concern is also in the company’s management proficiency. Most shareholder will be comparing a firm’s management with another firm, or comparing from time to time. Shareholder...
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...Frederick Cole Burgess ACC 220 Joe Chandler Importance of Financial Statements Financial statements are important reports. They show how a business is doing and are very useful internally for a company's stockholders and to its board of directors, its managers and some employees, including labor unions. Externally, they are important to prospective investors, to government agencies responsible for taxing and regulating, to lenders such as banks and credit rating agencies, and to investment analysts and stockbrokers. They are especially useful to managers, investors and creditors. Firstly, managers of businesses, more than any of the other users, benefit most from the use of financial statements, especially those who are good at understanding and analyzing these statements. Managers are able to not only discover problems and find corrective actions needed through financial statements but they are also to make projections of these statements that act as goals and standards for upcoming periods. They are then able to assess performances against these projections at the end of the accounting period. Managers are also widely concerned with the financial ratios. First the ratios provide indicators of how well the company and its business units are performing. Some of these ratios would ordinarily be used in a balanced scorecard approach. The specific ratios selected depend on the company's strategy. For example a company that wants to emphasize responsiveness to customers...
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...Financial Statements and There Importance in Outside Interests Jay Whittington ACC 205 Instructor Angela Sneed 4/23/12 Financial statements are used in accounting to give an accurate representation of the financial health of a given business or entity. These statements and their underlying importance of accuracy cannot be overlooked. It is of the utmost importance for a business to present accurate financial statements not only to meet reporting requirements internally, but also to satisfying outside reporting expectations. This is particularly crucial when it comes to outside business interests because potential investors and potential lenders need to access financial statements in order for them to make decisions based on the financial status and overall performance of the business. Accurate financial statements are also important for regulatory authorities as well as government bodies (Homgren, C. Harrison, W. & Oliver, M. 2012). The laws created around financial statements make it clear that companies should make submissions of all their financial statements on an annual basis. Tax authorities also must have access to financial statements in order to looks at profits and if the correct amount of taxes are being paid. When lenders or investors are evaluating a business they use the information from the financial statements to look at the profitability or lack thereof. By looking at this they are able make decisions based things such as the likely hood...
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...determination is also necessary to keep a check on the cost of product/control on wastages, etc. The accounting used to study the various aspects of cost is known as cost accounting. In this lesson, you will learn about meaning, importance, limitations etc. of cost accounting. Notes OBJECTIVES After studying this lesson, you will be able to: state the meaning and scope of cost accounting; explain the objectives of cost accounting; differentiate between cost accounting and financial accounting; state importance of cost accounting; explain limitations of cost accounting. 27.1 MEANING AND SCOPE OF COST ACCOUNTING Cost accounting is the process of determining and accumulating the cost of product or activity. It is a process of accounting for the incurrence and the control of cost. It also covers classification, analysis, and interpretation of cost. In other words, it is a system of accounting, which provides the information about the ascertainment, and control of costs of products, or services. It measures the operating efficiency of the enterprise. It is an ACCOUNTANCY 95 MODULE - 6B Elementary Cost Accounting Cost Accounting : An Introduction internal aspect of the organisation. Cost Accounting is accounting for cost aimed at providing cost data, statement and reports for the...
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...manufacturing of packing boxes, a problem will arise what price of each box you should quote to the buyer. Many factors are considered while fixing the price of a product/item such as competitors’ price etc. One of the basic factors is the cost of its production. Cost is essential not only to fix price but also to ascertain the margin of profit. Knowledge of the cost determination is also necessary to keep a check on the cost of product/control on wastages, etc. The accounting used to study the various aspects of cost is known as cost accounting. In this lesson, you will learn about meaning, importance, limitations etc. of cost accounting. OBJECTIVES After studying this lesson, you will be able to: state the meaning and scope of cost accounting; explain the objectives of cost accounting; differentiate between cost accounting and financial accounting; state importance of cost accounting; explain limitations of cost accounting. 27.1 MEANING AND SCOPE OF COST ACCOUNTING Cost accounting is the process of determining and accumulating the cost of product or activity. It is a process of accounting for the incurrence and the control of cost. It also covers classification, analysis, and interpretation of cost. In other words, it is a system of accounting, which provides the information about the ascertainment, and control of costs of products, or services. It measures the operating efficiency of the enterprise. It is an 27 COST ACCOUNTING : AN INTRODUCTIONACCOUNTANCY ...
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...[pic]Importance of IaS [pic] Submitted to: Md. Safayat Hossain Lecturer Dept. of Accounting & Information Systems University of Dhaka Submitted by: Md. Nur Alahi Jony ID: 13 105 4th Year, 2nd Semester B.B.A, 13th Batch Dept. of Accounting & Information Systems University of Dhaka. Date of submission: January 11, 2011. IMPORTANCE OF INTERNATIONAL ACCOUNTING STANDARDS INTRODUCTION With globalization everything is spreading worldwide and communication gets importance highly in this regard. Business operations are also spreading globally in an increasing rate. Among other matters, accounting is treated as the “Language of Business”. And the communication of accounting information is must to operate the business. As the consequence, a set of globally accepted accounting standards is necessary to introduce best possible communication of accounting matters worldwide. NEED OF ACCOUNTING STANDARDS Accounting is the art of recording transactions in the best manner possible, so as to enable the reader to arrive at judgments/come to conclusions, and in this regard it is utmost necessary that there are set guidelines. These guidelines are generally called accounting policies. The intricacies of accounting policies permitted Companies to alter their accounting principles...
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...Introduction Financial statements are the key elements of business performance and health, and very related to accounting which is the back bone of any successful company. In this paper I will cover the three financial statements and the difference between each one of them, as well as which one is of most interest to investors, creditors, and management. The four statements are balance sheet, income statement, earning statement, and the statement of cash flow. A brief description of each statement will be provided according to its importance and use. The Balance Sheet Known as the most critical statement because it simply exposes what the business owns and owes. In other words the company’s points of power and weakness. It also shows the difference between the two which is known as the owners interest. What the company owns is called assets, and assets includes properties, lands, vehicles, inventory items, basically anything touchable including cash money. The balance sheet is organized similar to the equation: Assets = Liabilities + Shareholder’s equity, where assets are on the left of the sheet and liabilities on the right as well as shareholder’s equity (Walther, 2011). Balance sheet normally reflects a period of time and by the end of the reporting period owners are educated on what they own and owe. Liabilities on this sheet show current and long-term as they are listed based on due dates (Cagan, 2006). The Income Statement The elements of Income statement is revenue...
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...objective. This paper aims to answer the above questions and further goes on to say why both should and are considered a vital part of business and their importance in the whole business set up. Literature Review Accounting has been defined as the soul of the business (Collin P, 2004). Accounting is described as the means by which information is communicated in a firm, and is thus known as the language of business. Accounting is described as a vital function in preventing fraud and corporate corruptions in organisations (Glautier, M.W.E. and B. Underdown, Accounting theory and practice). Accounting is important as it provides information to external parties (stakeholders) by providing a true picture on the business financial position. Finance is described as an administrative function aimed at raising funds for the business (B.B Howard. Introduction to Business Finance). Finance is aimed to maximise the value of the firm and attain the main objectives of the firm; I. Shareholders wealth maximisation II. Profit maximisation This is achieved by determining the optimum capital structure and the efficient utilisation of resources by analysing risk and return (B. B Howard. Introduction to Business Finance). Findings and analysis Accounting Accounting may be defined as the reporting, reporting and analysis of financial records/transactions of a business. It can also be defined as the process of identifying, measuring and communication of economic information to allow for...
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...OF CURRICULUM DESIGN Financial Accounting ATLANTIC INTERNATIONAL UNIVERSITY TABLE OF CONTENTS Introduction ………………………………………………………….3 History ……………………………………………………………….3 Description………………………………………………………….....4 Financial Reporting …………………………………………………..5 Accounting Principles…………………………………………………6 Balance Sheet…………………………………………………………7 Income Statements……………………………………………………8 Other Financial Statements…………………………………………..9 Bookkeeping Cycle…………………………………………………….9 Regulations and Standards…………………………………………..11 Accounting Reforms…………………………………………………..12 Biological Assets Research…………………………………………...13 Literatures Review……………………………………………………..14 Methodology and Model…………………………………………….... 16 Findings………………………………………………………………….18 Conclusion……………………………………………………………….19 References………………………………………………………………20 Financial Accounting INTRODUCTION Financial accounting refers to information describing the financial resources. Obligation and activities of an economic entity (either an organization or an individual). Accountants use the term financial position to describe an entity’s financial resources and obligations at appoint in time and the term results of operations to describe its financial activities during the year. Financial Accounting encompasses the record-keeping aspect of accounting...
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...prior to doing so is the financial statement of the company. For small business as well as large firms, Investors and Creditors use a company’s financial statement to understand and analyze the financial condition of the firm and to see how well the firm is performing. Per Way, J. (n.d.), managers give great importance to the financial statements since publishing financial statements can provide management or senior leadership with tools to be able to communicate regarding the company’s accomplishments with interested outside parties. There are many ways to evaluate a firm’s performance, but the best way to do so, is by looking at actual numbers of profits and loss which is clearly reflected in the financial statement of the firm. Thus, a financial statement should be used an optimal tool to evaluate a firm’s financial standing before buying or investing in it. A firm’s financial statement consists of many different components. There are various ways a firm can evaluate their financial accomplishments. One such way is via an Income Statement. A typical income statement would consist of a firm’s expenses and sales revenues over certain period of time. This time could range from a month or quarter, semi-annually or annually. If someone wants to evaluate the bottom line income of a firm to understand how well the firm is doing, it is a two-step process. First, the firm’s operating income needs to be calculated by removing expenses from the income statement. After that,...
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...Financial Statement Differentiation Paper Abstract Considering the rapid globalization and expansion of business activities today, the importance of the four different financial statements; balance sheet, income statement, retained earnings statement and the statement of cash flows cannot be over-emphasized. This paper covers the four different types of financial statements, the information each one of it contains, and which statement is of most interest to investors, creditors, and management. Income Statement The Income Statement according to John Wiley & Sons modestly “reports the success or failure of the company’s operations for a period of time”. (Kimmel, P.D., Weygandt, J.J., & Kieso, D. E.,2009) The Income Statement shows Revenue minus Expenses which gives us the Total Net Income. Revenues are considered any type of revenue you get from the Service. Expenses on the other hand are salaries, supplies, rent, insurance, interest and depreciation. Investors are interested in the Income statement specifically the net income “because it provides useful information for predicting future net income.” (Kimmel, P.D., Weygandt, J.J., & Kieso, D. E. ,2009). Creditors as well are interested in utilizing the income statement because it assists them in predicting future earnings. Retained Earnings Statement The Retained Earnings Statement “shows the amounts and causes of changes in retained earnings during the period in this case the period would be “the...
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...pathway of measuring success through the designing projects as measuring the outcomes of the projects in line with the target goal of the organisations (Elliot, Barry & Elliot, Jamie, 2004). Organisations maintain their financial reports with the help of accounting theories and policies. The international financial reporting standards also help to keep the accounting practice effectively, efficiently, and correctly. The efficient management will be built if the organisation follows the international reporting standards accurately. As a mandatory course unit of myself I need to prove my understanding about the financial systems and auditing through this report. I will gradually demonstrate my understanding on the purpose, use, importance of accounting records, accounting systems, computerised accounting system, manual accounting systems, business risk, audit risk, internal and external control systems, importance of auditing, and planning audit assignment as well as preparing audit report in the body part of my report. Task One Purpose and Use of Different Accounting Records Accounting records represents the management of all source of information in different records books. These records are ledger, journals, bank statements, adjusting journals, statement verification, invoice, brochure, and etc. The purpose and use of different accounting record in the following. Purpose To illustrate the purpose of accounting records we chose main two types of accounting record. These...
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...What types of financial ratios are used to analyze financial performance? Financial ratios are categorized corresponding to the data they provide. The following terms are types of ratios used: 1. Liquidity ratios 2. Asset turnover ratios 3. Financial leverage ratios 4. Profitability ratios 5. Dividend policy ratios Are some more important than others? Why? Financial ratios give insight into an organization’s way of management and its financial state. Most ratios defined above can be evaluated from data made available by compiled financial statements. Which ratios are important to creditors, investors, and managers? Why? The importance of these rations allows a firm to analyze the market place and to measure the firm's financial data against those of other companies to steer away from unwanted financial problems- shutting down of operations. What is the purpose of financial statement analysis? According to (Robinson, Henry and Pirie, 2012), the purpose of a financial statement analysis is comprised of: • Evaluation of equity/debt investment/credit rating • Transfer of information • To use an analysis to develop a given financial statement inquiry. Robinson, T. A., Henry, E., & Pirie, W. L. (2012). International Financial Statement Analysis (2nd ed.). Hoboken, NJ: John Wiley and Sons, Inc.. What are some tools we might use to analyze financial performance? Readyratios.com (2014) informs that analysis of financial performance can be: • SWOT (strength...
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...The Importance of Financial Statements Accounting is one key function in organizations today. It is also becoming a top career students are studying. According to Weygand (2008) accounting consists of three key points –it identifies, records, and communicates the economic events of the organization. (p. 4). To grasp the concept of accounting this paper entails the purpose of accounting. The four basic financial statements are identified. The paper will also explain how financial statements interrelate with each other. It will further elaborate the importance to creditors, investors, managers, and employees. Companies need financial information to make decision on various aspects of a business. The most important purpose of financial information is to help determine profit or loss in business. Its shows the most popular products use over a period, which ultimately define the customers’ preference. They first key point of accounting mentioned above is identifying, which means the accounting department in each organization uses an accounting system or manually to identify the financial transaction. The second key point is to record it in a manner, which is understandable to track the organizational goals. Example, Hotels group financial transaction by departments –front office and restaurant transaction in a hotel are group individually to determine each department gains and losses. The third key point is it communicates. The information is communicated in forms of reports...
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...user required by publically held companies, the question of full disclosure for privately held companies still lingers. When it comes to financial reporting and the regulations that govern the reports, all companies should report in the same manner, including total disclosure. This paper will focus on one set of GAAP standards utilized for all companies regardless of whether they are public or private. Throughout this paper, we will explore the aspects of why it would be cost effective for all organizations to report with one GAAP standard, consistency in reporting, and the importance of less confusion (relevance versus reliable) by utilizing one set of standard for both public and private companies, rather than the creation of separate standards. Cost Effectiveness The adoption of one GAAP set of standards for public and private companies still remains supported by several accounting groups. A modification created by the GAAP for private companies, this could lead to changes in the disclosure, presentation, and recognition standards. According to California CPA Education Foundation, “Cost has been one of the main issues for proponents of modifying the standards for private companies.” The panel has discovered that it is very difficult to put a monetary value on the penalties of leaving out certain information in the financial statements. There have been recommendations for the private company accounting standard setting board to decide if there should be modifications or...
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