Question

What is the impact of accounting decisions on the financial statements?

-What would be the impact in the income statement and balance sheet?

Answer 1

Impact of accounting decision on the financial statement is immense as accounting decision like recording of various Assets and liabilities from various Different techniques can have impact on the overall financial management to a large extent as when we are changing the method of valuation of the inventory or when we are changing the method of valuation of depreciation, then we will have to understand the impact of these decisions on the various ratios calculation of the company and when we are comparing these ratios in financial management for decision making than it can have a greater impact so it can be said that financial accounting changes are having significant impact in the financial decision making in form of ratio analysis and proactive decision making so so it will have the importance.

Income statement and balance statement are highly dependent upon the accounting decisions as they will be reflecting the records of various accounting elements and hence they will be highly impacted by any decision in relation to accounting because when the accounting decisions are changed in respect to recording of the assets then it will be completely reflected in the balance sheet and if there will be some retrospective effect or prospective effect due to those accounting decision of changing in adoption of accounting standards then it will also have a impact on the overall books of accounts so it can be said that accounting decision will be directly affecting these elements of the financial reporting.