Requirements for accounting standards, Accounting Basics

Assignment Help:

The information contained in published financial statements is of specific importance to external users, as shareholders and investors. Without any information they would not be capable to take the right decisions regarding their investments. As in some other country, Parliament in India, given the Companies Act, the kind and minimum level of information that companies must disclose in financial statements. This is the responsibility of the accounting profession to make sure that the needed information is appropriately presented. This is evident that there must not be too much discretion to companies and their accountants to current financial information the manner they like. Conversely, the information comprised in financial statements must conform to carefully identified standards. Public confidence in accounting information comprised in financial statements will produce if they are satisfied like to the logic, fairness and consistency of the figures demonstrated therein. For illustration, a company could incur a loss and still pay dividends through manipulating the loss in a profit. In the long run, it course may have a disastrous consequence upon the company and its investors also.

You would be better capable to appreciate the function of accounting standards through relating them to the basic purpose of financial statements that is the communication of information affecting the allocation of resources. Perfectly, that information must make it possible for investors to estimate the investment opportunities offered through various firms and to assign scarce resource to the most efficient ones. Inside theory, such process should result in the capital distribution of resources within the economy, and should maximize the potential advantage to society.

In this context, unless there are reasonably suitable standards, neither the reason of the individual investor nor the nation like a whole such can be served. The reason is likely to be acts if the accounting methods used through various firms for presenting information to investors permits correct comparisons to be made. For instance, they should not permit a company to report profits that result simply from a verification in accounting methods quite than from increase in efficiency. If companies were free to decide their accounting methods in this manner, the consequences might be which deliberate distortions are introduced, leading finally to misapplication of resources in the economy. The relatively less able companies will be efficient to report fictitious profits, and like a consequence scarce capital of society will be diverted away from the more capable companies that have adopted more strict and consistent accounting methods.


Related Discussions:- Requirements for accounting standards

How to treat entry , Assume we had given tour advance to party how to treat...

Assume we had given tour advance to party how to treat entry and which head have to given expenditure? Ans) Cash/Bank a/c DR To Party(name)a/c (Advance Paid For Tour)

Explain about cost principle, Q. Explain about cost principle? As appli...

Q. Explain about cost principle? As applied to largely assets this principle is often called the cost principle. It utter that purchased or self-constructed assets are initiall

What is payroll record keeping, What is Payroll record keeping Employe...

What is Payroll record keeping Employer should maintain payroll records which will supply the name, social security number, address, gross earnings for every payroll, period o

The following financial data were taken from the annual, Based on the finan...

Based on the financial statements for Jackson Enterprises (income statement, statement of owner's equity, and balance sheet) shown below, prepare the following financial ratios. Al

Quote, Hi I need a quote for an assingment. How do I submit it to you?

Hi I need a quote for an assingment. How do I submit it to you?

What is the center of gravity, A supplier to the electric utility industry...

A supplier to the electric utility industry produces power  generators.  The Transportation costs are high.  One  market area includes the lower part  of  the Great  Lakes region

State about the trade discounts, State about the Trade discounts Perc...

State about the Trade discounts Percentage reduction from list price of the merchandise. These aren't recorded in the accounting records of the seller or buyer. Buyer always

Define Accounting, define accounting. Briefly explain its concepts

define accounting. Briefly explain its concepts

What is the marginal cost and average total cost, Below is a table with tot...

Below is a table with total data for a firm in a perfectly competitive industry. Quantity Total Cost 0 100 10

State the classified balance sheet, State the classified balance sheet ...

State the classified balance sheet ASSETS Current Assets are cash and any other assets which are expected to be realized in cash, sold, used up or expire within one year.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd