Challenges In Financial Accounting

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An investment in knowledge pays the best interest. Several Salient attempts to undertake significant roles in addressing challenges in corporate reporting ended up in a development in certain areas of financial accounting, if not all. The idea of financial accounting as a whole has the responsibility to identify the parties in business transactions and provide them with the information they need to do business in a fair and objective manner. In the same vain, the content of such information should be useful to present and potential investors and creditors, not excluding other external users in making rational decisions. The accounting practice requires that financial statements must be honestly prepared, continuously observed and all significant…show more content…
Accounting operates through basic principles and rules. There is a need to know that the purpose of financial accounting is not primarily to report the value of an enterprise. Rather, its purpose is to provide enough information for others to assess the worth of such enterprise. May, (1943, p.189 asserts; “it is an art, not a science, but an art of wide and varied usefulness”. An art that requires certain skills of implementing techniques and methods of presenting financial findings by following and implementing a universally accepted method. The process of financial reporting includes the financial statements and other relevant information to aid users in evaluating the enterprise. The emphasis is to make available detailed information about economic resources of an enterprise to those who have a stake in the corporation business, i.e. the society at large whose economic activities are reasonably affected in a corporate economy. Munter and Robinson (1999), p.6,…show more content…
In the traditional economic view, corporations are entities that provide maximal benefits to society when they continually seek greater profits. Sprouse (1988) explains that the most useful information about assets, liabilities, revenues, expenses, and other items of financial statements and their measures (that with the best combination of relevance and reliability) should be recognized in the financial statements. (Statement of Financial Accounting Concepts No. 5, paragraph 9). Financial statement information is relied upon in a wide variety of business transactions and contractual arrangements and is utilized in a wide variety of decisions other than buying and selling stocks and bonds in an organized market. The information in financial statements provides a convenient, if not essential, a basis for certain contractual arrangements such as those found in debt indentures, compensation programs, and acquisitions of
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