Question

You are employed as an accountant for Innovative Computing. Your company is in the process of signing a large contract with an electronics components supplier. You have a friend who works for the electronics components supplier, and you are aware of the company having trouble paying bills.

Explain why you should, or should not report, this to your employer before the purchase.

Answer 1

We should report this under the accounting principle of " Full disclosure principle".

Full disclosure principle says that user and reader of business should not mislead by any lack of information. This principle ensures that investor and stakeholders are aware of every relevant information about the company. The main purpose of the full disclosure principle is to avoid accountant not disclosing any information that could affect the business financial situation.

The financial statement should be transparent and include information which can be potential for the business decision of an outsider or about the company.

Information should be disclosed:-

1) Policies of accounting 2) Financial Statement (Including footnotes) 3) Any future expenses 4) Nature of relationship between business and other parties 5) Non-monetory transaction 6) Contingent Liabilities and Assets