Financial reporting is the process of disclosing an economic entity’s financial information and its other activities to diverse range of stakeholders. This information facilitates them in their decision making regarding financial and non-financial matters taking place within the firm.
Briefly explain narrating any FOUR points that how effectiveness of the information discourse may be compromised for an entity using single entry book-keeping system of accounting. (The answer should be in bulleted numbers 1 – 4. (Your answer should not be more than 150 words)
Answers
Answer:
1. In help and organization to comply with various statues and regulatory requirements. The organizations are required to file financial statements to ROC, Government Agencies. In case of listed companies, quarterly as well as annual results are required to be filed to stock exchanges and published.
2. It facilitates statutory audit. The Statutory auditors are required to audit the financial statements of an organization to express their opinion.
3. Financial Reports forms the backbone for financial planning, analysis, benchmarking and decision making. These are used for above purposes by various stakeholders.
Financial reporting helps organizations to raise capital both domestic as well as overseas.
4. On the basis of financials, the public in large can analyze the performance of the organization as well as of its management.
5. For the purpose of bidding, labor contract, government supplies etc., organizations are required to furnish their financial reports & statements.