Page 146 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 11: Introduction to Financial Reporting Framework

Internal users are the individuals who are directly involved in managing and operating Notes
the organisation.

Both internal and external users rely on internal controls to monitor the company’s
operations.
Publicly owned companies are required to periodically publish general-purpose financial
statements that include a balance sheet, an income statement, and a statement of cash
flows.

Financial statements are essentially interim reports and therefore, cannot be final because
the final gain or loss can be computed only at the termination of the business

11.6 Keywords

Accounting: Accounting means recording each transaction that takes place and further,
summarizing the records for financial communications.
Financial Statement: A financial statement is summarised data, collected and organised according
to logical and consistent accounting procedure.
Internal Users: Internal users are the individuals who are directly involved in managing and
operating the organisation.

Statement of Cash Flows: These statements provide reports on a company’s cash flow activities;
particularly it’s operating, investing and financing activities.

11.7 Review Questions

1. Accounting is the language of business throughout the world. Discuss.

2. What do owners expect from the business records?
3. What do lenders expect from the business records?
4. Each external user has special information needs depending on the kind of decisions he
has to take. What are the key informations required by different external users?
5. Discuss the limitations of financial statements and point out how these limitations can be
removed through management accounting.

Answers: Self Assessment

1. Accounting

2. Financial statement
3. Accounting system
4. Financial reports
5. Internal

6. Effectiveness
7. Production
8. Research & Development
9. Financial statements

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