It also let me let the proper way in preparing balance sheet and income statement for an organization. Neutrality is one of the ingredients of faithful representation, along with completeness and free from material error. It turned out that the IASB fell short of their expectation. Conceptual Framework for Financial Reporting . So, it make easier when an organization plan for future of budgeting. This is not an example of the work produced by our Essay Writing Service. a. This chapter considers the qualities of financial information that make it useful. 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? In task 2, the income statement and the balance sheet of Continental Limited for the end of 31 December 2010 will be prepared. Financial statement is a document that use to record down all the business transaction or the organization financial activities. Financial Statements show the financial position of the Company. Thus, Neutrality is a Characteristic of Financial Statements. Financial accounting concepts refer to the characteristic of accounting information that provides predictive value to users as the quality of: In task 1, 5 types of accounting users and their needs for the financial statement of Continental Limited will be discussed. The enhancing qualitative characteristic of understandability means that information should be understood by: A) Those who are experts in the interpretation of financial information. Meaning, it should show what really are present and what really happened, as the case may be. Financial Statement such as balance sheet depicts position of assets of the company strong enough to cover its liabilities. In order for the financial statements to be useful to the stakeholders of a business they must embody certain qualitative characteristics. FALSE. b. revenues minus expenses plus gains minus losses plus investments by owners minus distributions to owners. 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. Income Statement, also known as the Profit and Loss Statement, reports the company’s financial performance in terms of net profit or loss over a specified period.Income Statement is composed of the following two elements: Income: What the business has earned over a period (e.g. Besides, the five regulatory characteristics of the financial statements that help to provide useful information to those accounting users will be explain too. In task 1, the most common accounting users are defined and let me understand of the 5 basic characteristics of financial statement. Percentage of gross profit on sales 17600 x 100 30%, Percentage on operating profit on sales 74500 x 100 18%, = Net profit before interest x 100 (76500 + 3000) x 100, Debtor collection period 0.177 x 365 days 45days, Creditor payments period 0.132 x 365 days 60 days, Comparison between Continental Limited and Industry Averages to Assess Profitability. One of the elements of financial statements is comprehensive income. Neutrality: Neutrality in financial reporting information must be free from bias which the information provided does not favor to the particular group over other interested person. 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. 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. Users of financial statements frequently rely upon the data displayed in the financial statements to predict future financial outcomes. Question: The Following Selected Items Relate To The Qualitative Characteristics Of Useful Information: 1. Neutrality (c) Imperative for providing comparisons of a company from period to period. As described in Statement of Financial Accounting Concepts No. Materiality 8. 8 . Besides, it also helps managers to know how much their customers owe and how much they owe to their suppliers. or log in The conceptual framework's qualitative characteristic of relevance includes: A . Then, the accrued sales commission RM1500 is recorded under current liability in balance sheet. d. Reliability. September 2010 . Need help? Besides, they also need to know the accounting information to know how much they can withdraw as dividend payment. I want to comment for the next few minutes on several of the criteria that are critical for producing high quality, transparent financial statements. Since 2010, the structure of fundamental and enhanced characteristics of useful information was as below. Thus, Neutrality is a Characteristic of Financial Statements. reintroduce prudence as one aspect of the characteristics that make financial statements useful to investors. d. neutrality characteristic. B) Those who have a reasonable understanding of business and economic activities. Next, the industry averages provided to access profitability and liquidity of Continental Limited will be compared. a replacement of FASB Concepts Statements … What is the underlying concept governing the recording of gain contingencies? It might cause organization having shortage of pay back those liabilities and face short-term finance problem. ; Expense: The cost incurred by the business over a period (e.g. The objective of financial statements is to provide future-oriented information to help investors make business decisions. All work is written to order. Limited financial statement will be defined. Understandability . It will be prepared in an accepted format for the needs of external reporting and publication. Internal users includes of creditors, suppliers, investors, tax authorities, government agencies, customers, and financial analysts or adviser. The users’ perception about the qualitative characteristics of corporate financial reporting is far below the acceptable level and as such users have a negative attitude towards disclosures of financial reporting. The third type of accounting users is investors. Neutrality 9. In my conclusion, this assignment enables me to understand the usefulness and the function of the account which can helps to know well an organization easily. Taxation charge RM15300 is deducted from net profit at the bottom of income statement. Understandability The information must be readily understandable to users of the financial statements. The 5 types of accounting users and their needs. 8, neutrality is an ingredient of the fundamental quality(ies) of: Faithful representation, not relevance What is meant by consistency when discussing financial accounting information? If the account information not prepared to provide information in time, it will affect the decision making of accounting users which might cause loss. Characteristics ( a ) qualitative characteristic as expense put in profit loss account if income statement and balance for... 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