|
|
 |
|
|
|
|
|
| Title: | Qualities Of Useful Financial Reports |
| Author: | Marquez Comelab |
|
|
As a freelancer planning and implementing the accounting system
of the business that you hope is going to make you money, it is
important that your accounting system must produce information
that are going to be useful to you and to those who are reading
it.
How do you do this? Information that a business is expected to
present must be:
1. Understandable.
Naturally the information produced must be understandable. A
guideline is to provide information that people, who are willing
to understand it, can understand it: professionals or
nonprofessionals. As a business owner, you have to think of the
different accounting backgrounds of the different types of
people who will be reading your reports and match that
accordingly.
2. Relevant & Material
Relevance is the capacity of information to make a difference in
a decision. It is important to report and disclose information
that is relevant for anyone to make a decision. Accounting
information must also deal with things that are significant
enough to impact decisions that are made by those who use your
financial reports.
3. Reliable
People must depend that the figures and the facts printed on
your financial statements are true. How can you say that an
information is reliable? It must be verifiable. Free from error.
E.g. you can always look at a receipt to verify the amount of an
expense. As you already know, when you get audited, you must
verify all transactions that occurred in your business anyway.
4. Comparable & Consistent
Comparability relates to the ability of an information to be
compared with those of other similar companies so that
decision-makers can compare ‘apples to apples’ not ‘apples to
oranges’. However, Generally Accepted Accounting Principles
(GAAP) allow for certain choices of different accounting methods
for depreciation and inventory management.
5. Conservative
This applies mostly in situations where there is uncertainty of
an outcome but you have to estimate what this outcome might be.
The key is to choose the less pessimistic estimate. Of course
this may not always be a wise decision if the chances of the
less pessimistic estimate is very minute as opposed to the other
choice(s).
About the author:
Marquez Comelab is a private currency trader based in Melbourne
, Victoria . He is the founder of TheFreedomToChoose.com - an information portal about trading financial markets,
real-estate and business and OrangesAndLime.com -
producers of cards, prints & posters. Contact him at
mqz@orangesandlime.com.
|
|
|
|
|
