Accounting and financial statements

Accounting and financial statements

In this business world of increased competition, quality of financial information provided by companies is considered to be the most important element in process of decision making. This financial information of companies can be gained through accounting information systems and more than all from financial statements (Kraft, 2014). It is important to have real and accurate information presented through financial statements as it is one of the significant assumptions in case of decision making. Accountants and finance managers are considered to be communicators present within the firm. Accountancy is the art to communicate financial information related to a business corporate to users like shareholders and managers. This communication is done through financial statements in which economic resources of company are depicted under the management control. The art lies in selection of information that is useful for the user and that has high level of reliability. There is a need of periodic financial information of company by shareholders. This information assists them in evaluating the performance of one company by comparing it with other companies (Juárez, 2014). Nowadays, organisations are not needed to publish forecasted financial statements on regular basis and due to this reason shareholders use past financial statements to make predictions (Dyson, 2010). This essay is related to the critical analysis of financial statements that are used by shareholders for making necessary decisions. This essay contains analysis of important elements of financial statements, processes used by companies to complete financial statements, areas of subjectivity in financial statements, analysis of international accounting standards regarding rules of comparability of statements and critical analysis for the use of ratio analysis for comparing financial statements of companies.