Question

What is the importance of collecting, maintaining and providing accurate financial/ resource allocation records and reports? Discuss in 80 to 100 words (please answer in Australian Accounting environment and please type in your answer)

Answer 1

It is absolutely necessary for business organisations to collect, maintain and provide accurate financial/resource allocation records and reports in order to work in a strategic direction that leads to the fulfillment of the organisations's goals and to maximise it's stake holder's objectives.

The importance of maintaining financial/ resource allocation records and reports can be described in the following points:

1) The most important reason why a company should maintain financial records is to understand it's financial position as on any date.

2) From matters of tax perspective, it is absolutely crucial to understand where the company stands and how much tax it is required to pay to the government. Since tax is paid on Net profit, it is necessary to calculate it from income and expenses of the company.

3) For understanding the cash position of the company, it is important to maintain a Cash Flow statement that depicts the liquidity position of the company as on any date.

4) The maintaining of financial records is important in order to understand how much amount is payable or receivable by the organisation.

5) Resource allocation is an important aspect of business. It deals with managing the company's assets in a way that supports the fulfillment of organisation's goals. Resources are limited and to find out the best way to manage them in order to maximise the firm's objectives is the goal of resource allocation. Thus it is absolutely necessary to maintain records and reports relating to this matter.

With the context of Australian Accounting Enviornment, the financial statements should be prepared in accordance to Australian Accounting Standards set by Australian Accounting Standard Board (AASB). Also, companies operating in Australia are required to file a Business Activity Statement (BAS) to the Australian Taxation Office (ATO). The companies are also required to file financial reports with Australian Securities and Investment Commission (ASIC).