Financial reporting is the issuance of written documents in the form of the fiscal statements by the companies to the shareholders and other interested parties. The objective of these monetary statements is to interpret data about the reporting entitys financial performance and do that is useful to the wide range of users for assessing the stewardship of the entitys management and for making economic decisions.To be useful, this information must be represented faith fullyy, should be complete, prudential and free from material errors. The purpose of imposing regulations on method of accounting practices and setting standards is to fulfil the objectives of financial statements.
Need for Standards and Legislation
It was difficult for investors and other stakeholders to mend reasonable comparisons between two or like loyals when no legislations were oblige or any standards set. To change this the companies act was introduced and enforced in 1989.
The accounting concepts are guidelines which ensure that a firm is able to report its finances clearly and truthfully, giving an faultless account of the business at at a authorized time. The accounting standards that followed the guidelines of this law included the principle of prudence, consistency, accruals and matching, and going lodge in (approved code of accounting practice). These four concepts ensure that firms now stomach a foundation to improve their accounts reports.
Different users use financial statements for differents things.. Financial statements should allow a user to make predictions of future capital flows, make comparison with other companies and evaluate the managements performance. Firms should provide germane(predicate) and reliable information to its investors if it wants to be able to analyse its surface and analyse it relating to its competitors. Comparisons on progress would be distorted and valueless if firms employ accounting policy at random. Financial information is imperative for the government to calculate...
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