Question

L01-3 EXERCISE 1.3 What Is Financial Reporting? A major focus of this course is the process of financial reporting. a. What is meant by the term financial reporting? b. What are the principal accounting reports involved in the financial reporting process? In general terms, what is the purpose of these reports? c. Do all business entities engage in financial reporting? Explain. d. How does society benefit from the financial reporting process? LO1-5 EXERCISE 1.4 Generally Accepted Accounting Principles Generally accepted accounting principles play an important role in financial reporting, a. What is meant by the phrase generally accepted accounting principles? b. What are the major sources of these principles? c. Is there a single comprehensive list of generally accepted accounting principles? Explain. d. What types of accounting reports are prepared in conformity with generally accepted account ing principles?

Answer 1

A) Communication to stakeholder about Financial position of an organization.

(Stakeholder: Investors, creditors, government,Customer and Society)

B) Income & Expenses Statement: Income earned and expenditure incurred during a period

Balance Sheet: To assess the financial performance of the Company

Cash flow statement: To appraise cash inflow and cash outflow of the Company.

C) Financial position of an organization

• Analysis Sales, profit and expenses
• It is used to estimate the liquidity, funding and debt position of an entity.
• Helps in decision making.
• Transparency

D) Yes all business entities engaged in Financial Reporting as financial statement.

• To assess financial performance of an organization
• To achieve Company objectives and goals
• Assets, Equity, Liabilities, Revenues, Expenses, Cash inflow and outflow reflect in Financial reporting

E) Customer: Transparency of the Company, it help customer to know the status.

Competitors: Comparable industry analysis

Supplier: To know the credibility of an Organisation.

Investors: To assess financial performance.