Podcast
Questions and Answers
What does the Balance Sheet primarily show?
What does the Balance Sheet primarily show?
- The future prospects of the business
- The cash flow position of the business
- The profitability of the business over a specific period
- The position of the business on the day of its preparation (correct)
What is a limitation of accounting?
What is a limitation of accounting?
- It is highly accurate and reliable
- It provides a complete picture of a company's financial situation
- It is only used for small businesses
- It ignores changes in some money factors like inflation (correct)
What may occur when applying accounting principles?
What may occur when applying accounting principles?
- They may conflict with each other (correct)
- They always result in accurate financial statements
- They are only used for taxation purposes
- They are always in agreement with each other
What is a factor in certain accounting estimates?
What is a factor in certain accounting estimates?
What is a consequence of different accounting policies for the same item?
What is a consequence of different accounting policies for the same item?
What is an area in which accountants are taking an active role?
What is an area in which accountants are taking an active role?
What is a domain of accountancy that has been expanded beyond its traditional scope?
What is a domain of accountancy that has been expanded beyond its traditional scope?
What is a traditional role of accountants?
What is a traditional role of accountants?
What is an area in which accountants are taking an active role, beyond their traditional scope?
What is an area in which accountants are taking an active role, beyond their traditional scope?
What is a limitation of financial statements prepared by accountants?
What is a limitation of financial statements prepared by accountants?
Study Notes
Accounting and Law
- Accounting influences law, and law also influences accounting, as legislation about accounting systems is a product of developments in accounting knowledge.
- Banking, insurance, and electric supply undertakings may have to produce financial statements as prescribed by respective legislations.
Accounting and Management
- Accountants play a key role in management and are well-placed in the management team.
- A large portion of accounting information is prepared for management decision-making.
- Accounting data are used as basic source documents, and accountants understand the data requirements and can mould the accounting system to serve management purposes.
Limitations of Accounting
- There are misconceptions regarding financial statements.
- Accounting ignores changes in some money factors like inflation.
- There are occasions when accounting principles conflict with each other.
- Certain accounting estimates depend on the sheer personal judgement of the accountant.
- Different accounting policies for the treatment of same item add to the probability of manipulations.
- A Balance Sheet shows the position of the business on the day of its preparation, not on a future date, but users of the accounts are interested in knowing the position of the business in the near future and long run.
Role of Chartered Accountants
- Chartered Accountants play a positive role in determining proper fiscal policies and advancing trade, commerce, and industry.
- They should develop new techniques and prepare themselves for new fields of service towards their commitment to the concept of public goods and services.
- It is a social obligation for accountants to disclose greater information regarding corporate results.
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Description
This quiz covers the relationship between accounting and legislation, including the prescription of financial statements and the influence of accounting knowledge on legal developments.
