The Financial Information And Its Users

1715 WordsJan 26, 20177 Pages
In today 's world of accountability and innovativeness, there is much more need of ensuring there is efficient as well as effective technique of classifying, recording and identifying important financial data to make decision making process as easy as possible. There is developing necessity that entails gaining as well as upholding competitive advantage following stiff competition enabled via effective financial performances. Thus, it can be undertaken that accounting functions under social – economic environment, hence becoming unavoidable ultimately creating the need for systematic accounting theory and practices. It is as well necessary to note that at the moment, there have been cases of creative accounting which entail the aspect of…show more content…
Preparation of the financial reports used by the external users of the financial information entail going through a given accounting cycle process (Martínez and Lin, 2014 p. 245). It all starts by recording various financial transactions as they take place in the prime books or books of original entry. The data in the books of original entry is therefore posted to the respective ledgers, which therefore after being balanced; the balances carried down are transferred to the trial balance. From the trial balance, the final accounts are drawn. These final accounts include the income statement, statement of the financial position and statement of cash flow among others. All these final financial statements represent different accounting information that communicates the situation of the financial welfare for a given entity in a given period. Thus, it is a requirement that every company discloses its financial information to the public via publication to enable all the interested parties to make an informed decision. According to Morrissey, Meyrick, and Berry (2013 p. 149), management accounting includes that aspect of classifying and recording the financial information at the discretion of the management to assist them in carrying out their managerial functions. For instance, the budget
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