Question

How does 'motive' apply to a commercial business, what would 'motives' be in other organizations, and how would their differences impact the methods and manner of accounting and financial reporting for an organization? 1. 2. In what way does this moti e objective of financial reporting called "Accountability?"

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Answer 1

1) How does 'motive' apply to a commercial business, what would 'motives' be in other organizations, and how would their differences impact the methods and manner of accounting and financial reporting for an organization?

Answer:-

In general there will be two motives to perform any work, based on the expectations on the returns from the work. They are as follows;

a) Profit motive

b) Service motive

Any person starts his business in a profit motive, i.e to earn profit by doing business. So, this type of Profit motive will apply to a commercial business.

In other organizations the motive may be different i.e it may be " Service motive". Without expecting any kind of profit for the work preformed and only with a service motive is in their mind while performing the objectives of the organization it is called as " Service motive".

In case of works performed with " profit motive" while preparing financial statements business organization should prepare the following list of statements:

1) Profit and loss account,

2) Balance sheet,

3) Cash and fund flow statement

But, when works were preformed with " Service motive" and while preparing financial statements, that organization should prepare the following list of statements;

1) Income and expenditure account;

2) Receipts and payment account;

3) Balance Sheet.

And at the same time, the points to be noted as follows;

1) Balance between incomes and expenses in Profit and loss account is called as "Profit / loss"

2) Balance between incomes and expenses in Income and expenditure account is called as " Surplus / deficit "

3) Balance of profit or loss will increase the balance of the owner's equity and it can be withdrawn by the owner.

4) But the balance of surplus or deficit, increases or decreases the organizations equity which shall not  be withdrawn.

2) In what way does this motive relate to the objective of financial reporting called " Accountability? "

Answer:-

Accountability means, responsibility of answering  to the owners of the organization regarding the true and fairness in the financial transaction reported in the Financial statements.

The motive directly relates to the Accountability, because in commercial business organizations, transactions are preformed with a profit motive and all economic decisions taken by the management regarding what to purchase or what to sell, whether to invest or divest etc... are answerable to the owners of the business organization. But in case of Service organizations whose motive is service but not profit, all the transactions will be preformed with a service motive and they should be answerable to the people who provided donations to the organization. There may be general donations or specific donations. Managers of the organizations are accountable regarding specific donations to the persons who donated for the specific works or service projects. And for all other people organization should provide its financial statements for being accountable for the transactions preformed by it with service motive.