Managerial Accounting

Managerial Accounting

Overview of the Financial Statements

The financial statements have a lot of value for any company. The main reason is that the financial statements comprise of Income Statement, Balance Sheet, Cash flow Statements and Budgeting. They are useful in the interpretation of the financial transactions of the company. The financial performance of the company can only be stated good or bad when the complete analysis of their financial statements takes place. Therefore, all the issues related to the Managerial Accounting will be discussed in detail.

Importance of Financial Statements

The preparation of consolidated financial statements is of practical interest of accountants and financial professionals in many cases the presence in the operating business of several companies, and sometimes several entities at the level of physical persons. Current standards of accounting and financial reporting often involve a wide departure from the principle of consolidation exclusively legal entities. Thus, the existing accounting standards are actually based on a legal relationship, i.e., legally isolated enterprises, companies, in general, the legal entity of the economic content doing business at both corporate and individuals. Indeed, manipulation of entities simplifies the identification of risks and the benefits of activity as the very formation of legal entities legally provides for the separation of powers, fixing responsibility and rights to legal entities (Granlund, 2001).

At the same time, the economic substance of a transaction on business involves, in particular for small and medium businesses, operations at the level of both legal entities and individuals. Indeed, the views of beneficiaries extend business "over" the legal boundaries, and apply to the "business" in his understanding, corresponding, for example, the definition of the International Financial Reporting: Business- an integrated set of activities and assets, whose implementation and management of which can lead to income in the form of dividends, lower costs or any other economic benefits directly to investors or other owners, members or members. Probably, the development of financial accounting will follow the "management" view of owners, the final beneficiaries, bringing the standards in the future will be tenderer, and the requirement to "legally enforceable", in particular, the consolidated business, the requirements for consolidation only legal entities will be erased. All other values ??are for balance (Porter & Akers, 1987).

Benefits of Financial Statements

There is two possible ways to obtain economic benefits from the asset: its intended use or sale. It is logical that the company will choose the maximum possible benefits to operate or sell. Economic benefits that the company can get from the asset for its intended purpose, is called value in use. It is the sum of discounted future cash flows from the asset. Benefited from the sale of an asset reflects the fair value less costs to sell. Fair value less costs to sell is the amount that can be obtained from the sale of an asset in a transaction between independent, knowledgeable, willing parties to the transaction. Maximum possible benefit that a company can get from the asset, the standard refers to as ...