needed in one day
The importance of accounting concepts and conventions can be seen in preparing the financial statements in assessing the financial viability of the company, where accountants prepares the financial statement and provides the appropriate financial report for the management of any company.
However, accounting concepts and conventions are rarely disclosed in the financial statements because they are generally recognized as being the activity of the periodic preparation and presentation of the financial statements; but if the basic concepts and conventions are not followed when preparing and presenting the financial statement, difficulties will be faced during the analysis, interpretation, and reporting of financial statements. Therefore, it is necessary to understand that the earnest interpretation and analysis of financial statements must be taken into account constantly these concepts, assumptions, principles and conventions used in the preparation.
(4 marks X 4 = 16 marks)
1. To define if the accounting concepts and conventions function as a guidance in preparing financial statement.
2. To ascertain if accounting concepts and conventions assist in proving useful information for economic decision-making.
3. To ascertain if accounting concepts and convention assists in recognizing in how accounting transactions are looked into.
4. To define if accounting concepts and conventions leads in producing more meaningful and reliable financial reports.
Accounting performs an essential part in operation of business administration because it assists you in tracking income and expenses, ensure legal compliance, and supply shareholders, managers, and government authorities with the quantifiable financial information, which then are used for business decision making purpose.
There are three main components that are generated by the records, of which the financial statement is made-up:
· The income statement, which delivers information about the profit and loss of company
· The balance sheet, which provides a clear picture on the financial position of company as on a specific date.
· The cash flow statement, which is a bridge between the income statement and balance sheet and provides information about the cash inflow and outflow during a certain phase of time.
It is extremely important to keep your financial records solid and up-to-date if you wish to retain your company’s financial position robust.
You are required to:
Explain the reasons why Accounting is important for your business, regardless if it is small or large.
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