Question

Discuss the challenge created for financial accountants by the presence of uncertainty.

Answer 1

1. Accountants recognize some uncertainties as inherent in certain financial transactions. The challenge is to recognize uncertainty and apply the information in ways that reflect a more realistic financial picture of a company.

2. Uncertainty simply means the lack of certainty or sureness of an event. In accounting. ... The term is often widely used in financial accounting, especially because there are many events that are beyond a company's control that can greatly affect its transactions.

3. Some examples

A. If a sale of merchandise is made today for 1000$ with the money to be collected from the customer in several months. Until the cash is received, no one can be sure of the exact amount that will be collected. What should the business report now?

B. Firm is the subject of a lawsuit.

Perhaps a customer has filed this legal action claiming damage as a result of one of the company’s product. Such legal proceedings are exceedingly common and can drag on in the courts for an extended period of time before a settlement is reached. The actual amount won or lost (if either ever occurs) might not be known for years. What should the business report now. Problem remains the same

4. When ever any situation arises where there is uncertainity is involved, accountants must determine a logical method to communicate a fair representation of that information within the framework provided by financial accounting rules.

Pls like if logic explained