The financial accountant's duties vary from those of a general accountant, who works for himself or herself rather than for a firm or organisation directly.įinancial accounting uses a set of accounting standards which are developed. Financial Accountant's RoleĪ financial accountant may have job opportunities in both the public and private sectors. Non-profit firms, companies, and small businesses use accountants in financial matters. In India, companies must report the transactions that occur during the fiscal period or a financial year between 1 April to 31 March.įinancial accounting reflects the accounting on "accrual basis" over the accounting on "cash basis". Such transactions are outlined in the preparation of accounts, including the balance sheet, income statement, and cash flow statement, which document the financial results of the company over a particular period of time. Economic activities of any society without accounting are neither possible nor legal.Financial accounting is a particular type of accounting that includes a method of documenting, summarising, and reporting the transactions arising from business operations for a period of time. instead of giving importance to an exhibition of substantial information.Īs per Company Act, preparation of the balance sheet in the prescribed form is mandatory.Īlthough there are some limitations in the present accounting system, accounting in the present-day world has generally been accepted as a recognized profession.Įfforts are on throughout the world to overcome these limitations. Importance of form over substanceĪt the time of preparing accounts for a particular period, the emphasis is laid on the form, table, etc. Often management creates secret reserves intentionally by increasing or decreasing assets and liabilities for which the total financial picture of an organization is not reflected. Secrecy cannot be ensured for the involvement of many employees in accounting work, although maintaining secrecy is very important. The useful life of fixed assets is fixed up hypothetically, which does not stand accurately in most cases. The value of fixed assets is exhausted, charging depreciation for the allocated period. The allocation process is an important problem in the accounting system. But naturally, there is no system of recording events that may occur in the future. Recording of past eventsĪccounting past events are accounted for. In the case of inflation, the value of fixed assets shown in the accounts does not correspond to the real position. Restrain of Accounting PrinciplesĮxhibited accounting information cannot always exhibit a true and fair picture of a business concern owing to limitations of the accounting principles used.įixed assets are shown after deducting depreciation. Information regarding the activities of the business is expressed in a misleading way if an alternative method is used to achieve a particular object. There exists an application of alternative methods in determining depreciation of assets and valuation of stock etc. Under existing accounting systems, accounts are maintained considering historical cost ignoring current changed value.Īs a result, the accounts maintained fail to exhibit the exact financial position of a business concern. Under the accounting system, money value is treated constantly.īut the value of money always changes due to inflation. But events of great importance, if not measurable in terms of money, are not accounted for.įor that reason, recorded accounting information fails to exhibit the exact financial position of a business concern. Recording only monetary itemsĪs per accounting principles, only the events measurable in terms of money are recorded in the books of accounts.
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