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The Conceptual Framework states that the primary purpose of financial information is to be useful to existing and potential investors, lenders and other creditors when making decisions about the financing of the entity and exercising rights to vote on, or otherwise influence, management's actions that affect the use of the entity's economic ...
Financial information would be useful to users if such qualitative characteristics are present. When producing financial statements, the following must comply: Fundamental Qualitative Characteristics: Relevance: Relevance is the capacity of the financial information to influence the decision of its users. The ingredients of relevance are the ...
IAS 1 sets out the purpose of financial statements as the provision of useful information on the financial position, financial performance and cash flows of an entity, and categorizes the information provided into assets, liabilities, income and expenses, contributions by and distribution to owners, and cash flows.
while financial accountancy information is computed by reference to general financial accounting standards, management accounting information is computed by reference to the needs of managers, often using management information systems. Focus: Financial accounting focuses on the company as a whole.
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions." Financial statements should be understandable, relevant, reliable and comparable.
An accounting information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers.An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources.
Particularly, companies must disclose the material information which can influence the financial performance and some immaterial information can be excluded. [13] For example, a company owns $10 million net assets and therefore a default of customer with $1000 is immateriality and in contrast if the amount of default is $2 million, which can ...
It is an important indicator of a company's financial health, because a company can report a profit on its income statement, but at the same time have insufficient cash to operate. [ 2 ] [ 3 ] The cash flow statement reveals the quality of a company's earnings (i.e. how much came from cash flow as opposed to accounting treatment), and the firm ...