BUSINESS ACCOUNTS

Bridging Business Accounts

PART 1

Users of Financial Statements

The financial statement users include individuals or group of people who use financial statements to make economic and investment related decisions. The seven users identified by the International Accounting Standards Board in the framework for the preparation and presentation of financial statements include such as trade creditors, general public, employees, investors, lenders, customers and governmental agencies (AASB, 2004, p.12).

Investors

The investors are one of the prime users of financial statements as they are the one staking their money. They need to know the future prospects and the profit potential of the target company.

Suppliers and Other Trade Creditors

Creditors and suppliers need to know whether the company will have sufficient cash to meet their payment obligations in the short and long term.

Employees

Since employees are part of the organisation, there growth and remuneration depends upon the profitability and growth of the company. They analyse the financial statements to know the future prospects of the organisation which are directly correlated to the career development of employees.

General Public

The general public, voters and their representatives, analyse the financial statements out of interest to know the trend of the economy and the prosperity of the company. Moreover, they are also one of the stakeholders of the company.

Governmental Agencies

Government and related agencies are responsible of monitoring the allocation of funds, resources and the sources from where the company is generating them. They also need to know the financial statistics for the purpose of taxation and other levies.

Lenders

Lenders are interested in financial statements to judge the company's ability of repaying their interest and principle amount.

Customers

These users look upon the financial statement to evaluate the 'going concern' concept of the entity. Loyal customers and retailers who are dependent on the company's product are interested in knowing the status and life of the entity.

International Accounting Standard 1 “Presentation of Financial Statements”

Objective

The Standard establishes requirements for the presentation of financial statements and guidelines for their structure, at the same time sets the minimum requirements for their content. The purpose is to ensure that the financial statements are comparable with the financial statements of the same company of previous periods and with those of other enterprises (IASC foundation staff, 2009, p.1-2).

Scope

IAS 1 applies to all types of financial statements, prepared and presented. The rules set out in the standard are applied equally to all businesses and sectors. In addition, banks and other financial institutions must meet the reporting requirements set out on IAS 39.

The financial statements are required to provide information regarding Assets, liabilities, Equity, Expenses, revenues, Cash flows and changes in equity. Moreover, the components of financial statements include Balance Sheet, Profit and loss account, Cash flow statement, statement of changes in equity and notes including summarised version of the accounting policy (IASC foundation staff, 2009, p.1-2).

PART 2

The purpose of a Trial balance is to confirm the arithmetical accuracy of the accounting statements. There are certain errors which affects the balancing of the ...