Question

Do you think the financial statements provides ALL the necessary information to external users to make better decision? Mention any information that should be known by external users and not included in the financial statements?

Q2: From a personal perspective, why do accountants have to divide the life of the entity into periods?

Answer 1

Ans 1

Information that should be known by external users and not included in the financial statements are:-

Irregularities in the decisions of management.

Market value of the business.

Non-financial factors influencing the financial statements, for example, environmental factors.

Ans 2

Accountants divide the life of the entity into periods in order to follow the time period principle. If it is not done, then the business will not be able to ascertain that if they are incurring losses or gains. It helps in determining the financial position at a particular point of time.

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