WHAT ARE THE COMPONENTS OF FINANCIAL STATEMENTS? Balance Sheet Income Statement A statement showing either: All changes in equity, or Changes in equity other than those arising from capital transactions with owners and distribution to owners. Accounting policies and explanatory notes. Voluntary disclosure, outside the financial statements, a financial review on the main features of … Read more
As an accountant it is important to understand the purpose/reasons for an investor to read or understand the financial statements. Below tabulates some of the purposes/objectives: INVESTORS: PURPOSES/OBJECTIVES OF READING FINANCIAL STATEMENTS? Assess the stewardship of management on the use of the economic resources controlled by the enterprise. Assess the stewardship of management as a … Read more
CONSISTENCY PRINCIPLE OR CONCEPT · Consistency principle or concept means that once a business has adopted on one accounting method, it should use the same method for all subsequent events of the same character unless it has sound reason to change NOTES: This consistency concept advocates that there must be consistent treatment for similar items … Read more
BUSINESS ENTITY ACCOUNTING PRINCIPLE OR CONCEPT · Owner separate from the business · Company has a separate existence · Affairs of the owners separate from the business NOTES: By understanding this concept, we then realized that all the financial data will only be related directly to the activities of the business. The business is a … Read more
MONEY MEASUREMENT CONCEPT In money measurement concept only financial transactions are recorded Non-financial data are ignored In money measurement concept, Qualitative information are ignored Money measure at the time of transaction, no allowance for changing price level This money measurement concept ignores important economic information Hence by applying money measurement concept, you should realize that … Read more