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Kingsley Gift Project

The document outlines an assignment on the importance, objectives, and qualitative characteristics of financial statements in the context of financial accounting. It emphasizes the role of financial statements in assessing a company's financial health, aiding decision-making, ensuring regulatory compliance, and promoting transparency. Additionally, it details the key qualitative characteristics that financial information should possess, such as relevance, faithful representation, comparability, verifiability, timeliness, and understandability.

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3 views4 pages

Kingsley Gift Project

The document outlines an assignment on the importance, objectives, and qualitative characteristics of financial statements in the context of financial accounting. It emphasizes the role of financial statements in assessing a company's financial health, aiding decision-making, ensuring regulatory compliance, and promoting transparency. Additionally, it details the key qualitative characteristics that financial information should possess, such as relevance, faithful representation, comparability, verifiability, timeliness, and understandability.

Uploaded by

Josiah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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UNIVERSITY OF PORT HARCOURT

FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF MARKETING

ASSIGNMENT ON

INTRO TO FIN. ACCOUNTING

OSINOWO STEPHEN ADEOLUWA


U2023/0630051

COURSE: INTRO TO FINANCIAL ACCOUNTING


COURSE CODE: ACT 201.2
COURSE LECTURER: DR CHIDIEBERE C EBERE

FEBRUARY 2025
ASSIGNMENT QUESTIONS

Explain the importance of financial statement


The objective of financial statement
Explain the qualitative characteristic of financial statement

Explain the importance of financial statement

1.Assessment of Financial Health: They provide insights into a company's profitability, liquidity,
solvency, and overall financial stability.

2. Decision-Making Tool: Investors use financial statements to decide whether to invest in a


company.Management uses them to plan strategies and make operational decisions.Creditors
assess a company’s ability to repay loans.

3. Regulatory Compliance: Companies must prepare financial statements to comply with legal
and regulatory requirements set by authorities such as the SEC or tax agencies.

4. Performance Evaluation: They help track financial performance over time, enabling
businesses to identify strengths, weaknesses, and trends.

5. Transparency and Accountability: Financial statements ensure transparency in financial


reporting, fostering trust among stakeholders, including shareholders and the public.

6. Access to Financing: Banks and investors analyze financial statements before approving
loans or funding.

7. Facilitates Loan and Investment Approvals


Banks and investors analyze financial statements before providing loans or funding.
Demonstrates a company’s ability to generate revenue and manage liabilities.

The objectives of financial statement

1. Provide Financial Information to Stakeholders: it’s help investors, creditors, and management
assess the financial condition of the business and support decision-making regarding
investments, lending, and business operations.
2. Assess Financial Performance: Show profitability, revenue, and expenses through the
Income Statement.it’s help to compare current performance with past trends to evaluate growth
and efficiency.

3. Present Financial Position: The balance sheet provides a snapshot of a company’s assets,
liabilities, and equity. it’s helps stakeholders understand the company’s financial strength and
solvency.

4. Show Cash Flow and Liquidity: The cash flow statement reveals how cash is generated and
used in operations, investing, and financing.it’s helps assess the company’s ability to meet
short-term obligations and fund future activities.

5. Ensure Transparency and Accountability:


Promotes ethical financial reporting and reduces the risk of fraud. it’s builds trust among
investors, creditors, and regulatory bodies.

6. Aid in Regulatory Compliance: Ensures businesses follow accounting standards (e.g., IFRS,
GAAP). it’s helps in tax reporting and compliance with government regulations.

7. Assist in Business Planning and Decision-Making : it’s helps management formulate


strategies, allocate resources, and plan for future growth and assists in budgeting, forecasting,
and risk assessment.

8. Facilitate Comparisons: Enables comparisons between different companies within the same
industry. it’s helps investors and analysts evaluate competitive positioning.

Explain the Qualitative characteristic of financial statement

1.Relevance: Financial information must be meaningful and help users make informed
decisions.It should have predictive value (help forecast future trends) and confirmatory value
(help assess past decisions).

2. Faithful Representation: Financial statements should reflect the actual financial position of a
company.

3. Comparability: Financial statements should be prepared consistently, allowing users to


compare financial performance across different periods and companies.
4. Verifiability: Information should be backed by evidence (e.g., invoices, contracts) to allow
independent verification by auditors or other parties.

5. Timeliness: Financial information should be available to users in a timely manner to aid


decision-making.

6. Understandability: Information should be presented clearly and concisely so that users with
reasonable knowledge of finance can interpret it effectively.

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