The codes of conduct become the guidelines in enabling individuals to undertake their responsibilities accurately and with an element of professionalism. Fnancial reporting could be identified as the measure of the accounting outcomes of a business entity. Dspite the requirement for financial reports to be neatly presented, uiformity in the reporting becomes an essential aspect. Te reports are utilised in measuring performance of organisations and business entities, hnce there must be comparable aspects within the financial reports. Te need to undertake comparisons necessitates the establishment of standards, wich seek ensure uniformity (Shortridge & Smith 2009).
Fnancial reports are commonly presented to individuals with limited accounting knowledge, a accounting summaries. Acountants must stick to these guidelines for the generated reports to become sensible to individuals who are not accountants. Tere are numerous financial elements of business operations which cannot become accurately defined, yt they must be presented within a financial report, fr clarification. Mny of these assumptions have been fundamental in the establishment of the regulations which define the GAAP utilised in financial reporting. Te major assumptions made in establishment of these principles include the ones discussed below.
Tis is a fundamental assumption in the determination of accounting requirements for financial reporting. Bsinesses become clearly distinguished from their proprietors and have the capability to undertake their actions independently. Tis establishment of corporates as separate entities presents the requirement for businesses to present their financial reports periodically, ad independently, fr those of other entities. Te accounting principles require the presentation of financial statements to become clearly separated between the business and the owners. Tis element however remains an assumption the presented financial statements are complete reflection of the company’s statements (Weygandt et al.
Te financial statements presented by business directors always influence the statements since equity funds become reflected in the company financial statements. Fctors regarding owners’ equity share and capital investments form part of the financial statements making accounting entity remain only an assumption. Oganisations must always present their financial statements in regard to...
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