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Bussiness Accounting - Assignment Example
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 .
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.