The main purpose of financial statements is to provide the necessary information for users of these particulars. It has various uses in the financial statements like – equity holder, appointee, financial institution, employee, etc. thus, there is a different interest.
Generally, it is not possible for an institution to prepare these details in a format that is suitable for every user. So we also need qualities of useful financial statements.
However, at least those characteristics are essential for such details.
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Qualities of an Ideal Financial Statement
Thus, To meet the needs of these parties, the financial statements should have the following qualities.
1. Simplicity
It is necessary to have simplicity in financial statements. Simplicity means that all the data included in the financial statements can be obtained in simple language and simplified account books.
So, The size of the financial statements should not be unnecessarily large, should be prepared in such a way that I can use accounting machines. It is easier to prepare them in a descriptive and interpretive form.
Thus, we can say that it is necessary to have financial details in simplicity.
2. Relevance
In the financial statements, the information that reveals the purpose of the institution should be presented. The company’s activities should be coordinated with the objectives and principles of the company.
Otherwise, the information expressed in the financial statements will be relevant and inoperative.
Thus, the conclusions drawn from these will be misleading. Therefore only that information should be disclosed in financial statements. Which clarifies and fulfills the purpose of the company.
Therefore, it is suggested that business policies and principles should also be made clear with financial statements.
This will ensure the definitive knowledge of the company’s activities.
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3. Comparability
Financial statements should be of comparative study. Statistics of financial statements should be presented in such a way that they can be studied comparatively with their previous years.
Thus, by comparing the current figures and figures of the past years, the current status of any institution can be ascertained.
The study of qualified financial institutions of intermediate companies with other institutions makes studies possible.
Finally, a Comparative explanation gives information regarding risk and perception.
Therefore, Additional information should be given in financial statements for firm comparisons. This information can be given through various ratios, whose heads can be compared.
It is the qualitative characteristics of financial statements comparability.
4. Understandability
The main purpose of financial statements is to provide necessary information about the company’s resources and performance.
The format of the financial statements should not be complicated.
So, that even a person who does not have knowledge of the principles of accounting can also study the financial statements and conclude the conclusions.
Thus, As far as possible, their language should be non-technical and should have low columns.
The Best qualities of an ideal financial statement. And also the qualitative characteristics of financial statements- understandability.
Therefore, the information given in financial statements should be clear and understandable.
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5. Completeness
The information given in the financial statements should be complete. Financial details with incomplete information fail to meet their objectives.
Thus, For the completion of the information, necessary tables, explanations, comments, and explanations must be given.
Thus, these are fundamental qualities of financial statements.
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6. Accuracy
In the financial statements, the information given should be the current state of the institution and the real or true knowledge of the future.
Legal liability may also arise when giving false information.
7. Promptness
Financial details should be available immediately at the end of the financial period. On a very delayed basis, financial statements become aimless and useless.
This is the main qualities of good financial statements.
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8. Reliability
Qualities of financial statements that make them reliable. The information given in the financial statements should be Reliability.
So, If the information given in the financial statements is accurate then financial statements are reliable. Trusted financial statements should be used for decision making.
9. Analytical
Financial statements should be analytical, financial statements should not be the only one to reveal the facts, but also the reasons for it.
For example – if the benefit of the organization is increased, then what is the reason for it should be known from financial statements also.
also characteristics of a company’s financial statements according to the statutory provisions.
10 Qualities
The given essential qualities of the financial statement are necessary for any financial statements.
Now you understood the best Qualities of an Ideal Financial Statement
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