Question

5) Explain why organisations have policies regarding the use of assets and why do staff need to be aware of them and other organisational policies, procedures and accounting standards. (100–120 words)

Answer 1

Solution:

Financial statement represents the financial picture of the organization. It includes various assets and other element like liabilities, income and expenses. The organization should have the policies regarding the use of assets so that the value of the assets is determined properly at the end of the financial year. Also various accounting standard should be followed to make the financial statement clear and understandable to the users of the financial statements. Accounting standard states, the use and the presentation of various elements of the financial statement, so that it will be easily understandable by the users of the financial statements. To make the financial statement fair and proper presentation of all the relevant information, it is important to impose various policies and accounting standard by the organization.

References:

Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of accounting and economics, 31(1-3), 77-104.

Holthausen, R. W., & Watts, R. L. (2001). The relevance of the value-relevance literature for financial accounting standard setting. Journal of accounting and economics, 31(1-3), 3-75.