Besides the company is listed on a stock exchange in the country, wth a huge base of shareholders the company needs to frequently assess its financial statements to convey the right message to the shareholders and stay within the law. I is the financial obligations of the companies which on most occasions oblige management to address or review the financial statements of the company. Sareholders and the authorities will on most occasions want reports on the operations of the company. I addition the company has to follow the procedure in coming up with the reports.
Tus, tis paper illustrates and analyses some of the policies, pocedures and regulations which govern financial reporting (Oppermann, 2009). Eery single transaction has two effects on financial systems. Fr instance, i someone purchases a ticket from Ryanair, h makes a payment in cash in return gets a ticket. Tis simple transaction depicts two effects from the perspective of both the seller and the customer. I is profound that the buyer’s cash balance will decrease at the amount he paid to the seller; other hand the sellers account will depict an increase in cash (Agtarap-San Juan, 2007).
Acounting mandates the recording of both effects of a transaction in an entity’s financial statements. Tis is termed as the concept of double entry without which the accounting records will only be a partial reflective of the ideal information. Tke for a situation in which Ryanair purchases new airplanes and there is no record of how the purchase was made; csh or credit. I is only through the double system entries that this critical can conveyed.
Te two effects of an accounting entry are known as the debit and credit section; acording to the duality principle every debit results in a credit. Duble entry is recorded in a manner that the accounting equation is always in balance; Asets- Liabilities= Capital (Banerjee, 2005). Tis system uses elements of both cash basis and accrual system of accounting. I a cash basis format a transaction is recognized when there is either incoming or outgoing cash. Rception of cash from a customer leads to recording of while any which is made to the supplier ensures a record of assets or expense is made.
Hwever under the accrual basis revenue is recorded when it is earned and the expenses when they are incurred no matter any changes made in. ..
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