Introduction to Accounting

with other entities. To be comparable, accounting reports must belong to a common period and use common unit of measurement and format of reporting. Test Your Understanding - II You are a senior accountant of Ramona Enterprises Limited. What three steps would you take to make your company’s financial statements understandable and decision useful?

. —————————————————————————————— —————————————————————————————— . —————————————————————————————— [ Hint : Refer to qualitative characteristics of accounting information] As an information system, the basic objective of accounting is to provide useful information to the interested group of users, both external and internal. The necessary information, particularly in case of external users, is provided in the form of financial statements, viz., profit and loss account and balance sheet.

Besides these, the management is provided with additional information from time to time from the accounting records of business. Thus, the primary objectives of accounting include the following: . . Maintenance of Records of Business Transactions Accounting is used for the maintenance of a systematic record of all financial transactions in book of accounts.

Even the most brilliant executive or manager