Comparability: The results of financial analysis should be in a way that can be compared to the previous years statements. There are three characteristics of faithful representation: 1. External users are the users outside of the organization which includes of creditors, suppliers, investors, tax authorities, government agencies, customers, and financial analysts or adviser. September 2010 . In order to have neutral information, information must report in faithful and trustworthiness condition without changing anything that need to be conveyed for the purpose of inducing someone’s behavior. Besides, they also need to know the accounting information to know how much they can withdraw as dividend payment. In my conclusion, income statement and balance sheet for external reporting or publication must be prepared neatly and precisely. The following are all qualitative characteristics of financial statements . Accounting users is the people who need accounting information to make decisions, invest, planning and budgeting. The fifth type is the shareholders or owners of the company. In task 1, 5 types of accounting users and their needs for the financial statement of Continental Limited will be discussed. The people who wish to invest to an organization with expectation to get back reasonable profit in return are known as investors. Statement of Financial Position It contains information about the assets, liabilities and equity of the reporting entity at a point in time. But usually suppliers didn’t have proper communication and less interact among each others. As described in Statement of Financial Accounting Concepts No. In task 3, income statement and balance sheet for external reporting or publication must be prepared neatly and precisely. Reliability c. Comparability Financial Statement such as  balance sheet depicts position of assets of the company strong enough to cover its liabilities. The statement can also be compered with the figures of other concerns of the same nature. The qualitative characteristics of financial information . The forth type is the employees of the organization. c. Relevance. It is difficult to design financial reports which may be relevant to user needs on the one hand and also free from bias towards any particular user group on the other. Distribution costs Administrative expenses, Increase in provision for bad debts 2000 –, Income statement of Continental Limited for year ending 31 Dec 2010 for external reporting, Profit on ordinary activities before taxation 76500, Profit on ordinary activities after taxation of the year 61200, Balance sheet of Continental Limited for the year ending 31 Dec 2010 for external reporting, Total Assets Less current Liabilities 706200, Less Creditors: Amount Falling Due After More. B. Verifiability. The framework suggests that the relevance characteristic outweighs the faithfully represented characteristic if the financial statement is to be rendered useful. One of the elements of financial statements is comprehensive income. In task 3, the income statement and balance sheet of Continental Limited for year ending 31 Dec 2010 in accepted format for external reporting or publication will be prepared. Meaning, it should show what really are present and what really happened, as the case may be. For example, in the notes to financial statements, tobacco companies such as d. neutrality characteristic. The purpose of financial statements is to give financial statements information about the change in financial position, financial performance and financial position of the organization.These can provide data use in decision making such as investment, credit and economic decision making which are useful for various users. It is the qualitative characteristics of financial statements comparability. In my conclusion, accounting ratio can enable an organization or accounting users understand the liquidity and profitability of an organization. Sometimes budgeted figures are given along with the present figures. Relevance (b) Quality of information that confirms users’ earlier expectations. In task 4, an appropriate accounting ratios for year ending 31 Dec 2010 will be prepared base on income statement and balance sheet which done on task 2 and task 3. So, it make easier when an organization plan for future of budgeting. In this article, we review these assumptions and characteristics. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Get Fresh Updates On your job applications, and stay connected. It is also recorded as accrued taxation RM15300 under current liability in balance sheet. The percentages of Continental Limited is higher than the industry average, Comparison between Continental Limited and Industry Averages to Assess Liquidity. Accounting Information is not manipulated to increase the probability that users will receive it favorably or unfavorably. We're here to answer any questions you have about our services. One of the casualties of that stalled convergence effort was prudence. In last, the creditor payment period of Continental Limited is 48.18 days and the industry average is 60days. The table below is the calculation of the accounting ratio between Continental Limited and the industry averages for year ending 31 Dec 2010. Finally, in order for financial statements to be reliability, they must be neutral. Manager is a person who in charge in overseeing and manage all the activities of others working which includes of planning, organizing, leading and controlling. Internal users includes of creditors, suppliers, investors, tax authorities, government agencies, customers, and financial analysts or adviser. Neutrality 9. The IASB and FASB unanimously decided in May to retain neutrality as a characteristic desired in financial reporting. Transparency in Financial Statements (IAS/IFRS) By Gheorghe V. LEP ĂDATU 1, Mironela PÎRN ĂU2 Abstract: The provision of transparent and useful information on market partici-pants and their transaction is essential for an orderly and efficient market, and it is one of the most important preconditions for imposing market discipline. Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition most closely describes which measurement of financial statement elements? The move was driven largely by the rush to converge the Conceptual Framework with the position in the US. They are the boss of the company, so they were needed to know the performance of the organization and determine the future plan. A financial statement is reliability when it able to reflects the substance of transaction to present faithfully and truly what has already happened. Brief 9. b. revenues minus expenses plus gains minus losses plus investments by owners minus distributions to owners. b. revenues minus expenses plus gains minus losses plus investments by owners minus distributions to owners. It should not be treated as authoritative or accurate when considering investments or other financial products. Financial Statements show the financial position of the Company. So, these are the five characteristic of a financial statement that an organization should revise when preparing the company business financial accounts. Fundamental Qualitative Characteristics b. Neutrality – information is selected or presented without bias. The complexity and multiplicity of the qualitative characteristics of financial statements are widely discussed in the scientific literature (Shahwan 2008 [10]; van Beest et al. We The IASB's 2010 Conceptual Framework confirms this, "The fundamental qualitative characteristics are relevance and faithful representation." So, that even a person who does not have knowledge of the principles of accounting can … In task 2, an income statement and balance sheet with necessary working for Continental Limited for year ending 31 Dec 2010 for the internal use by company directors and management will be prepared. reintroduce prudence as one aspect of the characteristics that make financial statements useful to investors. Ideal Financial Statement Characteristic # 1. Agree. Provision for bad debts closing balance =10% x Debtor closing balance RM70000= RM7000, 31 Dec 2010 Closing Balance C/D 7000 1 Jan 2010 Opening Balance B/D 5000, Balance B/D 300000 Vehicles disposal a/c 50000, Provision for depreciation on vehicle account, Vehicle disposal account 12500 1 Jan 2010 Opening Balance B/D 60000, 31 Dec 2010 Balance C/D 60000 Depreciation as expense put in, Vehicle cost sold 50000 Provision for depreciation on vehicle sold 12500, Difference for loss on disposal of vehicle 2500, Provision for depreciation on premises account, Balance C/D 54000 1 Jan 2010 Opening Balance B/D 40000. 6, "Elements of Financial Statements," comprehensive income is equal to . Next, the 5 characteristics of financial statement is comparability, reliability, timely, relevance, and accuracy. 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