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Bussiness Accounting - Assignment Example

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Bussiness Accounting

All users will have access to the published accounts of a business such as the accounts filed with the registrar of companies by a limited company.
The value of any interpretation of company accounts is restricted by the deficiencies of the accounts themselves as a tool for decision making. Published accounts present a very limited amount of data i.e. depending upon which profit format under the 1985 companies account is chosen a limited company may not disclose cost-of-sales.
Another problem that arises in the use of published accounts is that the reporting entity may not be the business unit that the user is concerned with i.e. if a company is engaged in several types of activity then an employee in one particular section of the business unit will not be able assess the employee prospects in that particular part of the business by reference to the published account of the company as a whole.
b. Assets consumed are recorded as expenses in the profit statement as historical cost although the cost of replacement will be higher. Therefore it is argued that the profit figure is over-stated in terms of real increase in value obtained by businesses.
d. c. Assets shown in the balance sheet are recorded as historical cost although as a result of price level changes, though their current value may be substantially higher
d. The contents of published financial statements are largely prescribed by the companies acts(supplemented by SSAPs and FRSs ) most organizations treat the companies act as the maximum disclosure requirement and do not give much information to outsider on the grounds of confidentiality and maintaining competitive advantage.
e. Published accounts look backwards usually into the past year ,so they are of limitedvalue to people who want to estimate future performance.
The current drawbacks deriving information from Current system of published accounts are:
a. A lack of sufficient conceptual framework where results are shown in arguably over-complex rules and processes and ultimately in a failure to meet the need of those who are using the accounts.
b. Information overload is potentially as much a problem as is sufficient information the complexity of the accounting principles also contribute toteh uncertainty and lack of information by users.
c. A continuing problem is the historical focus of accounting which reduces the relevance for users who are most likely to be interested in the future prospects of the company.

Solutions to the problem of gathering reliable information from published accounts for financial users:
Though the traditional legal model is arguably the more conservative and gives primacy to shareholders'. The current accounting standards debates indicates that at-least recognition of other group interests.
A broad range of potential information users gives rise to several questions relevant to a disclosure regime. It is appropriate to ...Show more

Summary

The annual published accounts are sensible and suitable for showing what company directors have done with the resources provided by shareholders. These accounts may also be scrutinized by other users other stakeholders who have different goals and purposes .
Author : dibbertlonny
Bussiness Accounting essay example
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