Question

please continue and identify and describe the two balance sheet liability classifications and explain the purpose of financial statement disclosures? Why do we need financial statements and how does it really do for us?

Answer 1

identify and describe the two balance sheet liability classifications

The liability section is customarily divided into:

• Current Liabilities are those obligations that will be liquidated within one year or the operating cycle, whichever is longer. Normally, current liabilities are paid with current assets.
• Long-term Liabilities relate to any obligation that is not current, and include bank loans, mortgage notes, certain deferred taxes, and the like. Importantly, some long-term notes may be classified partially as a current liability and partially as a long-term liability. The portion classified as current would be the principal amount to be repaid within the next year (or operating cycle, if longer). Any amounts due after that period of time would be shown as a long-term liability.

The purpose of Financial Statement disclosures and why do we need financial statements and how does it really do for us

User and uses of accounting

• Accounting-The information will identify and record the economic events for an organisation .It then communicates these information to a wide variety of interested users.
• Internal Users -Internal users of accounting information plan,organise and run companies.
• External Users-Lending such as bankers use the accounting information to evaluate the risks of lending money
• Suppliers use this accounting information to decide whether or not to grant credit risk to a customer.
• Investors lenders other creditors are considered to be the primary or key external users of the accounting information.
• Ethics in accounting is of utmost importance to accountants and decision makers who rely on the financial information by produce.