FINAL ACCOUNT

1. The companys statement of fnancial position is more

important than its income statement. Evaluate this
statement?
For statement of fnancial position
It enables to know the investment made on the non-current asset
which will contribute to business e!ansion.
Its shows the current assets current liabilities with which the
li"uidit# o$ the business can be measured
It also reveals the lon% term borrowin%s which are committed b#
the business.
It shows how the $unds are or%ani&ed in the $orm o$ share ca!ital
and reserves.
It clearl# de'nes the overall 'nancial state o$ the business.
For income statement
The !ro't made b# the business $rom tradin% activit# can be
understood.
It %ives the details o$ e!enses incurred and the income
receivable to determine the net !ro't.
The business some times ma# have health# 'nancial !osition but
tradin% at a loss( this can understood $rom the income
statement.
The !rovisions are created to maintain the e!enses with the
revenue which is an a!!lication o$ accountin% conce!ts.
Conclusion
The statement o$ 'nancial !osition is more im!ortant com!are
to the income statement as it reveals the 'nancial state o$ the business.
2. Evaluate the importance of auditors report in the fnancial
statement of the company?
Positive
Auditor)s are an inde!endent bod# o$ !ro$essional accountants
who check the accounts o$ a com!an#
The re!ort %ives con'dence to the shareholders and other
stakeholders that the accounts are !re!ared with a true and $air
view.
It also enables the ta authorities and other statutor#
de!artments $or the com!utation o$ accounts.
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The check o$ the accounts will minimi&e the errors and the re!ort
can be utili&ed b# the com!an# $or borrowin% 'nance etc.
The re!ort enables the users to make decision such as
investments.
Negative
The auditors re!ort will not ensure that material $raud has not
taken !lace
The auditors are not ver# inde!endent and some times act as
accordin% to the wishes o$ the directors.
I$ the auditors -oin hands with the directors then the re!ort could
be misleadin%
Conclusion
It is an e.ective mana%ement tool which would %ive con'dence to the
shareholders and other stakeholders that the accounts !re!ared are correct
and enable them to take decisions.
. Evaluate the importance of directors report in the fnancial
statement of the company
Positive
The directors re!orts !rovides the in$ormation such as( no/ o$
shareholders( directors( shareholdin%s( remuneration to workers(
!ro%ress in research and develo!ment( business e!ansions(
$uture e!ected !ro't etc0
The directors) re!ort enables the users to com!are with other
com!anies to evaluate the !er$ormance.
The re!ort enables the shareholders and other stakeholders to
take decisions $or $uture investments.
The re!ort enables to understand the !er$ormance o$ the
com!an# !resentl# and $or the $uture !eriod.
Negative
,re!aration o$ the re!ort re"uire( time and mone# to !rint various
co!ies.
The directors ma# %ive a $ault re!ort as i$ the# are actin% in $avor
o$ the com!an#.
The shareholders and other stakeholders cannot solel# de!end on
the re!ort $or takin% decisions.
Conclusion
Accountin%( unit*+'nal account ,a%e *
It is an im!ortant mana%ement tool which enables the users to
evaluate the !er$ormance o$ the com!an#.
!. Evaluate the usefulness of disclosing e"ceptional items or loss
on discontinued activities separately in the pu#lish format
according to $%&
Positive
1isclosin% the items se!aratel# enables the users to understand
the chan%e in the !ro't $rom one !eriod to another
It will enable the users to anal#&e the !er$ormance and take
decisions re%ardin% $uture investment
Negative
1isclosin% the items se!aratel# will add more '%ure to the
statement which makes the users di2cult to understand.
3hen more details are disclosed( the com!etitors take the
advanta%e to !ut themselves in a better !osition
Conclusion
It is im!ortant $or the users o$ the in$ormation to disclose the items
in order to evaluate the !er$ormance and take decisions.
'. Evaluate the usefulness of limited company( preparing their
fnancial statement in accordance to $%& )
Positive
,re!arin% the accounts in a standard $ormat will make it eas# $or
the users to com!are between two com!anies
A standard $ormat will enable the com!anies to $ormulate the
accounts.
4am!le/ so$tware !ro%ram.
A standard $ormat %ives more room $or the users to understand
the accounts.
The com!an# will be bene'ted i$ a standard wa# o$ !re!arin% the
accounts is $ollowed to determine the '%ures in the 'nancial
statements.
It will enable the accountant to learn one method instead o$
a!!l#in% various methods.
Negative
The accountant should be trained to !re!are one !articular
$ormat.
All the re"uirements cannot be com!uted $rom one sin%le $ormat
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,ro$essional knowled%e will be re"uired to !re!are and also
understand the $ormat.
Conclusion
,re!arin% o$ standard $ormat would enable the business to
understand in a
6etter wa# and reduce mani!ulation.

Accountin%( unit*+'nal account ,a%e 7