Accounting is the art of registering, classifying and summarizing, in economic terms, the company’s commercial activities, giving rise to interpretation of the results as approximately is possible to reality. The accounting record of the different transactions gives as a result the financial statements, the latter show us the economic situation of a company for a certain date.
However, the accuracy of the financial statements results in
monetary terms has limitations as follow:
The financial statements data are only provisional reports, since the given data is only as approximate data, the validity of them is transitory and relative. This is because the statements are prepared for specific dates, generally they are generated for a period of one year. The economic reality of a company can only be determined when it is liquidated or sold.
The Financial Statements refer specifically to the ongoing businesses, they are based on different aspects, which are estimates that are considered in the different sections of the accounting periods.
Financial information does not reflect those products that can not be quantified, such as intellectual property, research products, ideas, strengths and weaknesses of employees, products and services under development. Only the financial position of the company is shown in the financial statements.
They are not a reflection of the factors that transgress in the
financial position. These factors include the raw materials with their
commitments, their sources and promises. In addition to that, financial
information is analyzed according to the reasons, which differ according to the
relevance of the information.
All the data that are registered in the accounting and are shown in
the financial statements of the companies, is processed through the principles
of accounting and personal judgments of the accountant. The financial
statements are analyzed and compared with current liabilities.
Transactions, evolutions and / or internal, external changes and
other aspects around the business that affect the entity's economic and
financial level are recognized in accordance with current regulations, which
are applied differently, as established in the policies of the company, the
sector and the economy, which makes comparability with other companies in the
sector a limitation.
It is important to bear in mind that all these limitations mentioned
can be clarified in the notes to the financial statements, according to the
accepted accounting principles and criteria of the accountant and the
administration of the company.
ParticipantsDiana Pineda
Bibiana Aguirre
Kelly Mendez
Hello colleagues, this blog allows us to reference some of the most notorious implications of the limitation of financial information in its current form of presentation, this being a high-water mark when it comes to making decisions and the impact that it has on both internal clients as external since the assessment is subjective through data of a specific cut without an extra record or a qualitative assessment.
ResponderEliminarInteresting the aicle on the limitations like:
ResponderEliminar-The data of the financial statements that fulfill their function of being provisional reports that do not adjust to the real monetary value.
-Financial information that does not reflect the products and therefore can not be quantified.
And as you mention, it is concluded that "all these limitations mentioned can be clarified in the notes to the financial statements and analyzed based on the relevance of the information and current regulations, as established by the company's policies, the sector and the economy, which makes comparability with other companies in the sector a limitation."
hi everyone , to add other important limitacion: Financial information does not reflect those products that can not be quantified, such as intellectual property, research products, ideas, strengths and weaknesses of employees, products and services under development. Only the financial position of the company is shown in the financial statements.
ResponderEliminar