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What is the impact of a company financial Statements if it is not prepared on the assumption that an enterprise is a going concern?
Wiki User
∙ 12y ago
A going concern is an accounting assumption that states that a business will stay in operation for the foreseeable future.
When the financial statements are not prepared for the annual report, it is the responsible of the Board of Directors must put this information into the footnotes to the financial statements and state any factors that may threaten that status.
Further, the fact that the business is not a going concern means that it can not pay its liabilities and realize its assets. The company's auditor is responsible to the Board of Directors and must determine whether or not the company is still a going concern.
The auditor is required to disclose any negative trends in the company's business operations. Negative trends would be lower operating income, loan denials, loan defaults, repossession of assets, and more. The auditor then must not issue a "going concern opinion."
Investors may have second thoughts about holding the stock of the company if an auditor does not issue a going concern opinion in the annual report.
Wiki User
∙ 12y ago
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Who are financial statements prepares for?
financial statements are prepared by accountants to submit to the government for taxation purposes.
What is the going concern assumption?
In accounting, "going concern" refers to a company's ability to continue functioning as a business entity. It is the responsibility of the directors to assess whether the going concern assumption is appropriate when preparing the financial statements. Financial statements are prepared on the assumption that the entity is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of operations.
Financial statements are directly prepared from?
Adjusting Trial Balance
Two financial statements are prepared from the information on the work sheet?
yes
Adjustments would be not necessary if financial statements were prepared to reflect income from?
Lifetime operations.
Why is accounting standards important for financial statements?
Accounting standards ensures that financial statements are prepared whereever in the world is same and information provided on it is comaprable and readable for all kind of users.
What is consolidating financial statements?
hen a large company acquire one or more small companies then acquiring company is called the parent company and acquired companies are called subsidiary companies so when the financial statements of parent company and subsidiary companies are prepared in one financial statement altogether those financial statements are called consolidated financial statements.
What types of accounting reports are prepared in conformity with generally accepted accounting principles?
Financial Statements
Importance of accounting standards?
Financial statements are prepared to summarize all business activities by an enterprise during an accounting period in monetary terms & report financial outcomes in terms of performance, status of assets, liabilities & flow of cash. These business activities vary from one enterprise to other on one hand and size & volume of business on the other hand. To compare the financial statements of various reporting enterprises poses some difficulties because of the divergence in the methods and principles adopted by these enterprises in preparing their financial statements. In order to make these methods and principles uniform, comparable, transparent, establish accountability and bring true & fair view of Financial Statement - Accounting Standards are evolved.
Why companies consolidate their subsidiaries for financial reporting purposes?
Subsidiary companies are also part of group of companies so parent company is required to show the financial statements of group as a whole so that's why consolidated financial statements are prepared
What are the main types of financial statements that is to be prepared by an entity?
The financial statements vary according to the type and scale of entity, however following statements can be found in any entity:Statement of Financial Position - Balance SheetStatement of Financial Performance - Profit & Loss - Income StatementDepreciation ScheduleStatement of Changes to EquityCash Flow StatementNotes to the Financial StatementDirectors ReportDirectors DeclarationHope this helps!
Why is the going concern assumption an important consideration in understanding financial statement?
According to Going Concern Assumption it is assumed that the said business will continue in the foreseeable future and will not liquidate in future, This assumption ensures the faith of investors, potential investors, and all the stakeholders in the business. Thus the Financial Statement is prepared on the basis of Going Concern Assumption.
