The Role, Objectives and Limitations of Published Annual Financial Statements

Topic 

The Role, Objectives, and Limitations of Published Annual Financial Statements

Instructions

Task:
Read lecture notes to pick out the relevant theory. Chose ONE of the following questions:
Question 1

Critically discuss the role, objectives, and limitations of published annual financial
statements for companies.
Question 1 Guidance:
Your essay should focus on the challenges facing financial accountants when
preparing financial statements. In discussing the objectives and limitations,
you should also discuss the need for and sources of regulation. Accounting
standards that refer to the measurement basis to be used should feature
prominently in your work, as should academic and practical evidence to
support or challenge the currently recommended approach.

Question 2
Critically discuss the effectiveness of management accountancy as a tool for decision
making, planning, and control.
Question 2 Guidance:
Your essay should focus on the challenges facing business when making and
implementing decisions. The effectiveness of one or two key management
accounting techniques and concepts should feature prominently in your
work, as should academic and practical evidence to support or challenge how
successfully the techniques achieve their aims.

Answer Preview 

The primary role of financial statements in a company is to provide the relevant users with the information contained therein about the financial position of the company, its performance, and any changes that have been effected regarding the financial position of the enterprise. These records are useful to the managers, shareholders, creditors, current and prospective investors, financial institutions, employees, customers, competitors, the general public, and the government in making financial decisions (Scott 2014). The managers use the financial statements to adequately manage the affairs of the company by assessing the records and making informed decisions for the good of the enterprise. The shareholders assess the potential risk of return on investments to the company using the financial statements provided so as to make their investment decisions based on the statements’ analysis. Current and prospective investors use these statements of the financial performance of a company to assess the viability of investing in that particular business enterprise by predicting risks and gains (Plotnikova and Plotnikov 2014).

Word Count: 1800