FINANCIAL ACCOUNTING

The Current Value of Narrative Reporting in Financial Accounting

The Current Value of Narrative Reporting in Financial Accounting

Introduction

The conceptual framework of financial accounting highlights the usefulness of accounting information to guide decision making by economic users of the same. From the point of view of economics neo-classical, the role of narrative reporting in financial accounting is to provide neutral information for the readers to let markets operate efficiently, so that individuals adopt rational choices. But limiting the usefulness of financial accounting information to the economic decision-making by users is reductionist, in view and potential uses that hosts the annual report. The financial accounting is the most important and basic accounting system for purposes of authorization and accounting management. The narrative reporting of financial accounting basically based on the notes and bonds, assets and liabilities, receipts and payments relating to all transactions carried out by a government, even if not determine actual cash flows.

Discussion

Purpose of Narrative Reporting

The current value of narrative reporting in the financial accounting is to cover all the transactions of any event or action that results in the creation, transformation, exchange, transfer or extinction of economic value and financial (Debits and credits) that arises from the interaction between different actors (public administrations, society, families, etc.), and is by mutual agreement or unilateral act of public administration. Similarly, transactions can be monetary, in the case of exchange of means of payments or other financial assets or liabilities, or non-monetary (transfers or transfers of assets, exchanges, etc.). Transactions are not considered natural disasters, theft, etc. The recording of transactions presented in the narrative reporting from which they derive cash flows is performed in order to fully implement the content of authorization of appropriations estimates.

The recording of transactions that do not have the cash flow is carried out through regularization accounting, consisting of commitments corresponding to the findings of the same amount and mandates paid in receipt of revenue in the budget of the administration itself. The accounting adjustments are made only with respect to transactions involving accounts receivable and payable, or which produce effects of economic-patrimonial nature (Elliot & Elliot, 2008, pp. 121-35).

Narrative reporting: Accrual financial

The principle of financial accounting reporting based on competence requirements:

the criterion of recording the assessment and commitment with which they are charged to financial income and expenses derivate the bonds legally completed (active and passive);

The method for recording of receipts and payments, which must be allocated to periods in which the treasurer has done this.

The principle is applied only to those financial documents that make up the system of the budget of every government adopting financial accounting, and implementing the contents of authorization of appropriations in the budget.

The annual budget of expertise and cash budget and multi-year expertise have an authorizing, establishing limits to expenditure commitments and payments, with the exception of services for third parties and for the reimbursement of cash advances. The authoritative function also refers to the switching loans. The improved legal obligations in the financial accounting are ...