The aim of this report is to find out about the use and purposes of financial reporting in an ever-increasing global market place and to review the information requirements about the users of financial statements. This will be done by considering the global marketing and check how the use and purpose of financial reporting is used by different global business companies. Also in this report, it will be showing different rules and principle based accounting systems which can help business's show if they are in financial trouble or not.
There two types of users of accounting which are Internal and external, the internal users (primary users) are Management, Employees and owners, the external users (secondary users) are creditors, investors, customers and regulatory authorities.
The internal users are usually presented their accounting information usually through a form of management accounts, budgets, forecasts and financial statements.
The external users of accounting information are usually present with information in a financial statement, the reason for this is help them make a good financial decision.
Global marketing covers the global marketing mix, it looks on product service decisions, global pricing, global logistics and channel decisions, and global marketing communication. The reason for global marketing is to help companies engage with two reasons is to take benefit of opportunities for growth and expansion in the market and to check if a right decision can be made for business survival, Business's that fail to follow the global opportunities available are more likely to lose their domestic markets eventually because bigger and better firms will come along and be
There is a few importance's today in the global market which is shaped by the lively stronger and more competitive. relationship of several driving and restraining forces. The recent market needs and wants up to date technology, transportation, improvements, costs, quality, global peace, world economic growth and a recognition of different chances to help develop power by functioning globally.
According to (Elliot and Elliot,2011) When accountants are recording information, it is usually done systematically which is a relatively simple method for collecting records from different business transactions for example: purchase of non-current assets (equipment , buildings) which are kept as long term items in the business as they are items which are always needed all the time to run a business, paying wages and salaries into an income statement which is usually done at the end of the accounting period, once the information is collected from a business it will be put into a book-keeping system.
The information can firstly go into a trial balance at the end of a period time which is usually 6 months or 12 months, a trial balance will show the connection between assets (what things the business owns or what debtors owe them). Records from the company's trial balance will be put into a statement of financial position which will show a balance at the end of the accounting period. In accountancy, the records are usually created on a double entry recording system which will show every financial transaction, it will have two parts – one for the assets and the other for the liabilities.
Accounting information is used by accountants and external users such as investors and creditors in a business to help towards making financial decisions.
The different types of document s used when producing business records are statement of profit and loss( profit and loss account), which is used to show whether or not a business has gained a profit or made a loss over their financial year.
A statement of financial position (balance sheet), tells the business what it owes and what it owns. It also lists the company's assets and liabilities and capital (equity).
auditing and compliance records, by looking at the financial statement the shareholders will be able to evaluate the stewardship of management to find out whether or not they have reached their target goals of increasing the shareholder's capital, Investors are allowed to make economic decisions by looking at the financial statements.
Statement of financial position can show the main key figures of how many assets and liabilities the entity has and can also help stakeholders look at the performance of which the board of directors have made and if they have made any effective use of the equity
Tax returns are used to report the business's income; VAT returns and PAYE (pay as you earn) records.
Accounting information is used to collect information from different business systems and examine their account information to allow companies operate more effectively, efficiently and economically also known as the three “E”'s. By examining a business's account information, it can also show the matching of costs and revenues.
GAAP referred to as generally accepted accounting principles which is a term that states a set of rules, standards and practices which is used throughout the accounting industry to get ready and standardize financial statements which are issued outside the company. These standards can help creditors and stockholders better compare companies( Van Horne and Wachowicz,1977)
Businesses are expected to stick to the generally accepted accounting principles(GAAP) when they give their financial information. GAAP is not always used for some business', some companies that are without external investors are not obliged to follow the GAAP standard
Accounting has three different main rules which are:
An Entity concept means that the owners personal transactions are always treated separately from those from the business.
Periodicity rule (time -period assumption) is the main point of a business as it can work out a business's final documentation on a yearly basis to keep them up to date this usually happens at the end of the year. This rule is uninformed period of time especially when entities have an unlimited life.
The period is mostly 12 months long in most companies because they have events with a seasonal pattern (G.E. Whittenburg et al.,2001)
The ‘Going- concern' rule is a very simple but an important concept as this is used when preparing financial statements as it will think that the business can and will continue in the foreseeable future. This will have important implications for the valuation of assets and liabilities.
The Quantitative rule can assess the performance of a business through ratios.
Measurement rules which can control how information should be recorded.
The Money measurements concept means some of the transactions in the business's accounting records can only be measured in monetary terms but the value of the money can change over a period.
Historic costs means when an asset such as building and equipment and liabilities such as money owed to creditors, is recorded in the accounts at their original value at the time it was purchased, this will not change in the account books even if the value of the asset has increased or decreased (Flower and Ebbers, 2002).
Realisation concept also known as revenue recognition concepts a very important rule as this can show the gross inflow of cash, receivables and any other considerations.
Matching(accrual) concept is another important rule as it will measure the profit for a certain period which is essential that it matches accurately to the cost associated with the revenue. This concept is closely related to the realisation rule.
Dual aspect concept is the basis for the double entry book keeping, as it means that a debit should always be equal to a credit like in a t- account. But every financial transaction can have its dual aspect in a business.
Materiality Rule relates to the meaning of the business's transactions, balances and mistakes which can be found in the financial statements. Information in the financial statements should be completed for them to show a factual and fair understanding of the concerns of the entity.
Ethical rules refer to the standards of right and wrong performance in the accounting profession.
Prudence Rule, this rule can tell the accountants if the overall profit is likely to be lowered and can be less danger if it has not paid out to the owners and it not being able to be recovered
Consistency rule is that the same accounting rules and polices must be followed in the accounting period if there are any changes in situations that can make a change correct.
Objectivity concept is when accountants have to avoid personal bias and prejudice when picking and applying the accounting rules, as this helps accountants to deal problem without letting their own personal feelings overpower a certain decision.
Relevance concept can generate information which can help accountants with decision-making if someone is perusing the information (Alexander, 2004)
The logical conclusion in this report I have come to notice that there are two main users for different accounting information requirements of user accounts which are primary and secondary users which can help users to make financial decisions.
In accounting, there are a lot of different ways for a business to keep track of its finances and to check if the business is financially stable to keep operating or not, this is usually done by an accountant doing some bookkeeping (financial statement, tax records and VAT returns). The accountants have to oblige by three main rules/principles which are Boundary rules, measurement rules and ethical rules.
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