Thursday, February 21, 2013

Qualitative Characteristics Of Financial Reporting

A Financial Statement is a document report business monetary performance and resources. It shows how a firm has use the funds entrusted to it by its stockholders, sh atomic number 18holders and lenders, and what is its current financial position.
The three basic financial statements are the balance sheet, which shows firms assets, liabilities, and owners equity or hold earnings on a stated date; the income statement, in like manner called profit & loss account, which shows the sales and expenses of a business everywhere a period of time, and cash flow statement, which shows the inflows and outflows of cash caused by the firms activities during a stated period. Financial statements are usually compiled on a quarterly and annual basis.
Qualitative characteristics of Financial Statement
The soft characteristics of financial statements are a set of attributes which together imbibe the information in the financial statements utile to the users. The qualitative characteristics of usable financial reporting identify the types of information are promising to be most useful to users in making decisions astir(predicate) the reporting entity on the basis of information in its financial report. The qualitative characteristics apply equally to financial information in general purpose financial reports as well as to financial information provided in other ways.

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The four lead-in qualitative characteristics are understandability, relevance, reliability and comparability.
Financial information is useful when it is relevant and represents faithfully what it purports to represent. The usefulness of financial information is compound if it is comparable, verifiable, timely and understandable. Relevance and faithful representation are the essential qualitative characteristics of useful financial information.
The four main leash qualitative characteristics are understandability, relevance, reliability and comparability.
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