![]() This may be in the preparation of a business plan/proposal or when applying to a funder for a loan or selling a share of the business to an investor/partner. Another common use of the accounting function for entrepreneurs is in the preparation of financial forecasts.Depending on your business structure and industry, you may also be required to provide your financial information to government agencies or even some trade associations under membership rules. This is usually annually for income tax but laws in some countries require more frequent reporting due to value added taxes and employee withheld taxes. The most obvious one is the help in preparing our financial records for tax assessment purposes.it provides the most relevant and reliable information possible to allow for the real work to be done – the making of the best possible decisions. It is not art to be hung in a museum as a ‘ beautiful set of numbers’. One final point to make here, is that accounting is not an end in itself. Investors in some failed enterprises may sadly call it a method of fooling some of the people, some of the time with what has been dubbed ‘ Creative Accounting’.Potential investors may see it as a method of evaluating an organisation’s effectiveness in relation to industry benchmarks and the investor’s required returns.Governments may see it as a way of making organisations accountable to the general community by way of taxation contributions and transparency in the outcomes from their decision making.Banks and other providers of loan funds may see it as a process of providing reports showing the financial position of an organisation in relation to the assets owned, amounts owed to others and monies invested as well as the profitability of the organisation’s operations in relation to repaying the loan with interest.A Board of Directors or a Chief Executive Officer (CEO) may see accounting as a data process and reporting system that provide the information needed for sound financial or economic decision making for their organisation.Labor unions may see it as a monitor of an organisations activities and performance, particularly in relation to the benefits secured by employees Vs owners.Corporate managers may define it as a set of timely gauges that helps them actually manage the organisation.Economists may define it as the practical application of economic theory in that it measures income and values assets.Professors of Accounting may call it “The language of business.”.As such, there arise differences in financial accounting and reporting, which magnify upon reaching the analysis and reporting stage. On the other hand, a company working under the consignment sale model can record a sale only when goods are actually sold to customer (and not the sale channel intermediaries). For example, a company working with the distributorship model records its sale when the goods leave the factory against a purchase order from the distributor. This might not always be due to choice but also a requirement of the business model itself. Exampleĭifferent companies and countries follow different methods of financial accounting and reporting. It defines the basic characteristics that make the accounting information useful right from detailing the elements of financial statements (Income, assets, liabilities and provisions etc.) to reporting their purpose and standard comprehension. ![]() This helps auditors prepare legible reports that can be understood around the globe. ![]() It ensures consistency of comprehension and provides a base for discussion (and dispute resolution) amongst the practitioners by setting up principles of uniform interpretation of the line elements in financial statements. ![]() The ACF clearly defines the objectives and users of the financial statements. ![]() What is the definition of conceptual framework? The accounting conceptual framework is a theory that details the basic reasoning underlying the financial statements and financial reporting in general. Definition: The Accounting Conceptual Framework (ACF) is a set of accounting objectives and fundamentals, developed by the International Accounting Standards Board (IASB) to ensure uniformity in interpretation across various accounting methodologies. ![]()
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