UGANDA MANAGEMENT INSTITUTE

POST GRADUATE DIPLOMA IN PUBLIC ADMINISTRATION

MODULE: Financial Accounting and Management
Sn Name Regit!ation Num"e! Email Add!e Signatu!e
1 Owacha Ongom Florence 13/DPAM/EVE/077
2 Isingoma Raphael 13/DPAM/EVE/07 Isingoma200!"#ahoo$com
3 %#ar&'& (&r& 13/DPAM/EVE/003
) *em+a+a,i Doreen 13/DPAM/EVE/0!0
! *emigisa Ai-ah 13/DPAM/EVE/0).
*&sasira Enoc/ 13/DPAM/EVE/0
#UESTION
Dicu t$e !egulato!% &!ame'o!( o& &inancial !e)o!ting &o! an% o!gani*ation o& %ou!
c$oice in Uganda and e+)lain $o' accounting conce)t, P!inci)le and Con-ention
in&luence t$e )!e)a!ation o& &inancial tatement &o! t$at o!gani*ation.
1
Int!oduction
Financial acco&n0ing is 0he process o' i-en0i'#ing1 meas&ring an- comm&nica0ing economic
in'orma0ion 0o o0hers so 0ha0 0he# ma# ma/e -ecisions on 0he +asis o' 0ha0 in'orma0ion an- assess
0he s0ewar-ship o' 0he en0i0#2s managemen0$
In0erna0ional Financial Repor0ing 30an-ar-s 4IFR35 are -esigne- as a common glo+al lang&age
'or +&siness a''airs so 0ha0 compan# acco&n0s are &n-ers0an-a+le an- compara+le across
in0erna0ional +o&n-aries$ 6he# are a conse7&ence o' growing in0erna0ional sharehol-ing an-
0ra-e an- are par0ic&larl# impor0an0 'or companies 0ha0 ha8e -ealings in se8eral co&n0ries$ 6he#
are progressi8el# replacing 0he man# -i''eren0 na0ional acco&n0ing s0an-ar-s$ 6he r&les 0o +e
'ollowe- +# acco&n0an0s 0o main0ain +oo/s o' acco&n0s which is compara+le1 &n-ers0an-a+le1
relia+le an- rele8an0 as per 0he &sers in0ernal or e90ernal$
IFR3 +egan as an a00emp0 0o harmoni,e acco&n0ing across 0he E&ropean :nion +&0 0he 8al&e o'
harmoni,a0ion 7&ic/l# ma-e 0he concep0 a00rac0i8e aro&n- 0he worl-$ 6he# are some0imes s0ill
calle- +# 0he original name o' In0erna0ional Acco&n0ing 30an-ar-s 4IA35$ IA3 were iss&e-
+e0ween 1;73 an- 2001 +# 0he %oar- o' 0he In0erna0ional Acco&n0ing 30an-ar-s <ommi00ee
4IA3<5$ On 1 April 20011 0he new In0erna0ional Acco&n0ing 30an-ar-s %oar- 4IA3%5 0oo/ o8er
'rom 0he IA3< 0he responsi+ili0# 'or se00ing In0erna0ional Acco&n0ing 30an-ar-s$ D&ring i0s 'irs0
mee0ing 0he new %oar- a-op0e- e9is0ing IA3 an- 30an-ing In0erpre0a0ions <ommi00ee s0an-ar-s
43I<s5$ 6he IA3% has con0in&e- 0o -e8elop s0an-ar-s calling 0he new s0an-ar-s In0erna0ional
Financial Repor0ing 30an-ar-s$
6he Reg&la0or# Framewor/ is a se0 o' r&les1 prac0ices an- proce-&res 0ha0 ai- an- g&i-e
acco&n0ing$ 6he reg&la0or# Framewor/ o' Financial repor0ing is +ase- on In0erna0ional
Acco&n0ing 30an-ar- %oar- 4IA3%51 which has es0a+lishe- 0he =enerall# Accep0e- Acco&n0ing
Principles 0ha0 g&i-e 0he prepara0ion an- presen0a0ion o' 'inancial in'orma0ion$ On 0he o0her
han-1 6he In0erna0ional Financial Repor0ing 30an-ar-s 4IFR35 -escri+es 0he +asic concep0s 0ha0
&n-erlie 0he prepara0ion an- presen0a0ion o' 'inancial s0a0emen0s 'or +o0h e90ernal an- in0ernal
&sers$ 6he IFR3 Framewor/ ser8es as a g&i-e 0o 0he %oar- in -e8eloping '&0&re IFR3s an- as a
g&i-e 0o resol8ing acco&n0ing iss&es 0ha0 are no0 a--resse- -irec0l# in an In0erna0ional
Acco&n0ing 30an-ar- or In0erna0ional Financial Repor0ing 30an-ar- or In0erpre0a0ion$
2
In 0he a+sence o' a 30an-ar- or an In0erpre0a0ion 0ha0 speci'icall# applies 0o a 0ransac0ion1
managemen0 m&s0 &se i0s >&-gmen0 in -e8eloping an- appl#ing an acco&n0ing polic# 0ha0 res&l0s
in in'orma0ion 0ha0 is rele8an0 an- relia+le$ In ma/ing 0ha0 >&-gmen01 IA3 .$11 re7&ires
managemen0 0o consi-er 0he -e'ini0ions1 recogni0ion cri0eria1 an- meas&remen0 concep0s 'or
asse0s1 lia+ili0ies1 income1 an- e9penses in 0he IFR3 Framewor/$ 6his ele8a0ion o' 0he impor0ance
o' 0he ?IFR3@ Framewor/ was a--e- in 0he 2003 re8isions 0o IA3 .$
For 0he sa/e o' 30an+ic %an/ :gan-a1 which is +eing &se- as a case s0&-# in 0his regar-1 applies
0he =AAPs in i0s 'inancial repor0ing mechanism 0ha0 is g&i-e- +# 0he Ins0i0&0e o' <er0i'ie- P&+lic
Acco&n0an0s o' :gan-a 4I<PA:5$ 6he =AAPs1 as locall# en'orce- +# I<PA:1 in'l&ences 0he
'inancial repor0ing mechanism o' 30an+ic %an/ 4:5 as e9plaine- +elowA
I. Going conce!n Conce)t
6he en0erprise or +&siness is normall# 8iewe- as going concern$ I0 means 0ha0 30an+ic %an/ will
con0in&e opera0ing or r&nning 'or 'oreseea+le '&0&re 4a0 leas0 'or ne90 12 mon0hs5$ I0 is ass&me-
0ha0 30an+ic %an/ has nei0her in0en0ion nor necessi0# o' li7&i-a0ion or o' c&r0ailing 0he scale o' i0s
opera0ions$ 6his concep0 ass&mes 0ha0 when preparing normal se0 o' acco&n0s1 30an+ic %an/ will
con0in&e 'or a0 leas0 ne90 12 mon0hs an- i0 will no0 go in0o li7&i-a0ion or scale -own i0s
opera0ions$ 6he +ene'i0 o' going concern concep0 is 0ha0 asse0s o' +&siness will no0 +e 8al&e- a0
B+rea/ &p 8al&eB$ %rea/ &p 8al&e is 0he 8al&e o' +&siness2s asse0s a0 0he 0ime when 30an+ic %an/
is 'orce- 0o sell i0s asse0 +eca&se o' i0s li7&i-a0ion$ %rea/ &p 8al&e is normall# less 0han normal
mar/e0 8al&e or price o' 0he asse0s
Cowe8er1 an en0erprise has 0o -isclose 0he 'ac0 0ha0 i0 is going 0o li7&i-a0e in ne90 12 mon0hs an-
+&siness has 0o 8al&e i0s asse0s a0 +rea/ &p 8al&e
E/AMPLEA I' 30an+ic %an/ commence- on 1s0 Dan&ar# an- i0 has p&rchase- ! 8ehicles1 each
cos0ing E7000$ D&ring 0he #ear1 30an+ic %an/ manage- 0o sell 3 8ehicles a0 0he price o' E.000
each$ 6he remaining 2 8ehicles are 8al&e- in 0he 'ollowing circ&ms0ancesA
i$ 6here is a s&''icien0 e8i-ence 0ha0 30an+ic %an/ wo&l- +e li7&i-a0e- in 0he ne90 #ear
ii$ %&siness wo&l- con0in&e i0s opera0ions in 0he ne90 #ear
In 0he 'irs0 case 4i5 since 0here is a e8i-ence 0ha0 +&siness won20 +e con0in&e-1 +&siness sho&l-
-isclose 0ha0 i0Fs going 0o -iscon0in&e i0s opera0ion an- all asse0 will +e 8al&e- a0 +rea/ &p price
3
0ha0 is less 0han mar/e0 price$ In 0he secon- case 4ii5 +eca&se +&siness has an in0en0ion 0o carr# on
i0s opera0ions1 0he asse0 sho&l- +e 8al&e- ongoing concern +asis1 0here+#1 8al&e o' each 8ehicle
sho&l- +e E7000 in 0he +alance shee0 o' 0he +&siness
Im)o!tance o& Going conce!n Conce)t
I0 ser8es as 0he +asis 'or 0he prepara0ion o' 'inancial s0a0emen0 since 'inancial s0a0emen0s are
highl# in'l&ence- +# 0he con0in&i0# or -iscon0in&i0# o' a +&siness$ 6he calc&la0ion o' -eprecia0ion
e9penses are a''ec0e- +# 0he es0ima0ion o' s&ccess'&l '&0&re opera0ion o' a +&siness$ In case o'
30an+ic %an/ is going 0o -iscon0in&e i0s opera0ions1 asse0s nee- 0o +e 8al&e- a0 +rea/&p 8al&e
which is commonl# less 0han 0he mar/e0 8al&e o' asse0s$
II. Acc!ual Conce)t
An acco&n0ing concep0 &n-er which re8en&es an- cos0s or e9penses are recor-e- as 0he# are
earne- or inc&rre- an- 0he# are no0 recor-e- when mone# is recei8e- or pai-
E/AMPLEA I' 30an+ic %an/ ac7&ires mone# on cre-i01 i0 sho&l- recor- 0his 0ransac0ion a0 0he
-a0e o' ac7&isi0ion no0 0he 0ime o' pa#men0 o' mone# i0 owes an- same 0rea0men0 wi0h re8en&es
is e9pec0e-$ In ano0her e9ample1 wherein 30an+ic %an/ has 0o pa# E2000 as 0elephone prepai-
charges +&0 a0 0he en- o' acco&n0ing perio-1 +&siness has onl# &se- 0he ser8ice 'or E!00 an-
remaining E1!00 per0aining 0o 0he ne90 #ear 0ha0 is 0rea0e- as a c&rren0 asse0$ In 0his case1
+&siness has 0o recor- onl# E!00 as e9pense +eca&se i0 has inc&rre- onl# 0ha0 amo&n0 o'
e9penses$ 30an+ic %an/ sells Mone# on cre-i0 'or E200$ In 0his si0&a0ion1 i0 sho&l- recor- 0ha0
E200 as income e8en 0ho&gh 30an+ic %an/ is s0ill &npai- 'or 0he sale o' Mone#
Im)o!tance o& Acc!ual Conce)t
I0 helps -e0ermine 0he 0r&e an- 'air 'inancial per'ormance an- posi0ion o' an en0i0# since real
e9penses an- incomes are co&n0e- regar-less o' 0he -a0e as 0o when was mone# pai- or recei8e-
Accr&al concep0 g&i-es 0he calc&la0ion o' 0r&e ne0 income or loss 'or an acco&n0ing perio-$
Accr&al +asis o' acco&n0ing helps managemen0 o' 30an+ic %an/ 0o e8al&a0e an- anal#,e 0he 0r&e
'inancial posi0ion o' 0he +&siness$ 6here+#1 i0 helps managemen0 0o pre-ic0 0he '&0&re 'inancial
posi0ion o' 30an+ic %an/
T$e unde!l%ing aum)tion o& Acc!ual Bai
6his principle means 0ha0 0he e''ec0s o' 0ransac0ions an- o0her e8en0s are recogni,e- as 0he#
occ&r an- no0 as cash or i0s e7&i8alen0 is recei8e- or pai-$
4
III. Conitenc% Conce)t
6his principle re7&ires 0ha0 once a par0ic&lar acco&n0ing me0ho- or +ase has +een selec0e- an-
+ecome a polic#1 i0 m&s0 +e applie- con0in&o&sl# 'rom #ear 0o #ear$ 6o main0ain consis0enc#1 0he
presen0a0ion an- classi'ica0ion o' i0ems in acco&n0s or in 0he 'inancial s0a0emen0s sho&l- s0a#
same 'rom one perio- 0o ano0her acco&n0ing perio-$
E/AMPLEA I0 is an acco&n0ing principle 0ha0 'i9e- asse0s will +e -eprecia0e- o8er 0heir &se'&l
li'eG 30an+ic %an/ is 'ree 0o &se an# me0ho- o' -eprecia0ion 0o -eprecia0e i0s asse0s$ I' 30an+ic
%an/ selec0s s0raigh0Hline -eprecia0ion me0ho-1 i0 is ass&me- 0ha0 30an+ic %an/ will 'ollow 0his
me0ho- o' -eprecia0ion in 0he s&+se7&en0 acco&n0ing perio-s as well$ An# change in 0he me0ho-
o' -eprecia0ion will res&l0 in inconsis0enc# an- a''ec0 ne0 pro'i0 o' 0he compan#$
I0. Mate!ialit% Conce)t
Accor-ing 0o ma0eriali0# concep0 or principle1 all MA6ERIAI I6EM3 sho&l- +e -isclose- in 0he
'inancial s0a0emen0s$ In'orma0ion a+o&0 an i0em is ma0erial i' i0s omission or miss0a0emen0 co&l-
in'l&ence 0he 'inancial -ecision o' 0he &sers 0a/en on 0he +asis o' 0ha0 in'orma0ion$
E/AMPLEA 30an+ic %an/ has p&rchase- paper pins 'or E!$ 3ince 0his i0em is imma0erial1 i0
co&l- +e 0rea0e- as e9penses in income s0a0emen0 an- compan# wo&l- no0 show 0his i0em as an
asse0 in +alance shee0 e8en 0ho&gh compan# /nows 0he 'ac0 0ha0 paper pins will +e &se- more
0han one #ear or an acco&n0ing perio-
0. O&&etting Conce)t
Accor-ing 0o 0his concep01 an en0i0# canno0 o''se0 asse0s an- lia+ili0ies agains0 each o0her &nlessA
o''se00ing re7&ire- +# acco&n0ing =AAPs$ =ain1 losses an- e9penses arising 'rom same or
similar 0ransac0ions an- 0hese 0ransac0ions are no0 ma0erial
E/AMPLEA E9ample o' o''se00ing can +e regar-e- as when 30an+ic %an/ se0 o'' -e+0or agains0
same cre-i0or +eca&se i0s -e+0or an- cre-i0or is a same personG 0here'ore1 i0 is permi00e- 0o some
e90en0$ Cowe8er1 30an+ic %an/ canno0 o'' se0 a -e+0or wi0h some o0her cre-i0ors
0I. P!udence Conce)t
6he pr&-ence concep0 implies 0ha0 30an+ic %an/ sho&l- incl&-e a -egree o' ca&0ion in 0he
e9ercise o' >&-gmen0s nee-e- &n-er 0he con-i0ion o' &ncer0ain0#$ In o0her wor-s1 asse0s an-
incomes sho&l- no0 +e o8ers0a0e- while lia+ili0ies an- e9penses sho&l- no0 +e &n-ers0a0e-$
5
Pr&-ence is ca&0ion e9ercise- while preparing acco&n0s an- 'inancial s0a0emen0s$ Cowe8er1 i0 is
no0 permi00e- 0o crea0e secre0 or hi--en reser8es &sing pr&-ence as >&s0i'ica0ion
E/AMPLEA i' s&ppose1 30an+ic %an/ s0ar0e- 0ra-ing on Dan&ar# 1 an- sol- Mone# cos0ing
E!01000 on cre-i0 an- a0 0he en- o' 0he #ear1 acco&n0s recei8a+le was E)01000$ 30an+ic %an/
es0ima0e- 0ha0 i0 is less li/el# 0o ge0 pai- 'rom some -e+0ors who owe -e+0s amo&n0ing 0o E!000
o&0 o' E)01000 recei8a+le$ 30an+ic %an/ is now going 0o crea0e a pro8ision 'or -o&+0'&l -e+0s o'
E!000$ 3ales will +e shown in income s0a0emen0 a0 0he '&ll 8al&e i$e$ E101000 +&0 0he pro8ision
'or -o&+0 '&ll -e+0s will +e e9pense- o&0 in income s0a0emen0$ 3ince 0ha0 E!000 is &ncer0ain 0o +e
reali,e- in 0he 'orm o' cash1 pr&-ence concep0 signi'ies 0ha0 E!000 sho&l- no0 +e incl&-e- in 0he
income o' 0he compan#$
0II. Su"tance o-e! &o!m Conce)t
3&+s0ance o8er 'orm in-ica0es 0ha0 0ransac0ions or i0ems sho&l- +e presen0e- in con'ormi0# wi0h
0heir s&+s0ance an- economic reali0# no0 merel# on 0heir legal 'orm
E/AMPLEA 30an+ic %an/ go0 a 8ehicle on lease$ (ow 30an+ic %an/ is &sing 0ha0 8ehicle 0o
0ranspor0 i0s Mone# 0o 0he c&s0omers an- ge00ing economic +ene'i0s in 0he 'orm o' income$ 3ince
0he 8ehicle is in 0he con0rol o' compan#1 30an+ic %an/ nee-s 0o show 8ehicle in i0s +alance shee0
as an asse0 con0rar# 0o 0he 'ac0 0ha0 compan# is no0 0he legal owner o' 0he 8ehicle
0III. Rele-ance Conce)t
Accor-ing 0o 0his concep01 in'orma0ion in 0he 'inancial s0a0emen0s sho&l- +e rele8an0$ 6he
in'orma0ion is rele8an0 i' i0 a''ec0s 0he -ecision ma/ing o' 0he &sers
(o0e 0ha0 same in'orma0ion co&l- +e rele8an0 0o one repor0 +&0 irrele8an0 0o ano0her repor0
E/AMPLEA A &ser o' 'inancial s0a0emen0 has 0wo al0erna0i8es 0o 'inance 30an+ic %an/ +&#ing
shares or +on-s o' 0he compan#$ 30an+ic %an/ sho&l- presen0 in'orma0ion in 'inancial s0a0emen0s
in s&ch a wa# 0ha0 i0 can help &ser in his -ecision$ In o0her wor-s1 compan# sho&l- pro8i-e &ser
wi0h rele8an0 in'orma0ion 0o help 0he &ser in -ecisionHma/ing
I/. O"1ecti-it% Conce)t
6his principle agi0a0es 0ha0 Financial in'orma0ion sho&l- +e ne&0ral an- +ias 'ree$ In'orma0ion
m&s0 +e 'ree 'rom +ias 0o +e relia+le$ (e&0rali0# is los0 i' 0he 'inancial s0a0emen0s are prepare- so
6
as 0o in'l&ence or a''ec0 0he &ser 0o ma/e a -ecision in or-er 0o ge0 a pre-e0ermine- o&0come or
res&l0$
/. Relia"ilit% Conce)t
In'orma0ion wo&l- +e relia+le when i0 is 'ree 'rom errors1 +ias an- i0 is comple0e$ :sers o'
'inancial s0a0emen0s ass&me 0ha0 'inancial s0a0emen0s ha8e +een a&-i0e- which implies 0ha0 0he#
are acc&ra0e an- +ias 'ree$ 6here'ore1 30an+ic %an/ sho&l- -o&+le chec/ an- ge0 a&-i0e- 0heir
'inancial s0a0emen0s +e'ore p&+lica0ion
/I. T$e Mone% meau!ement Conce)t
Accor-ing 0o 0his principle1 acco&n0s will onl# +e prepare- 'or 0hose i0ems 0o which a mone0ar#
8al&e can +e assigne- E/AMPLEA In 0he +alance shee0 asse0s an- o0her i0ems are presen0e- in
some mone0ar# 8al&e i$e$ machiner# an- plan0 J E!00000
Im)o!tance o& Mone% meau!ement Conce)t
Implemen0a0ion o' 0his concep0 res&l0s in &ni'ormi0# o' 'inancial s0a0emen0s prepare- +# -i''eren0
companies1 i' all o' 0hem are 'ollowing 0he same mone0ar# &ni0 4s&ch as -ollar5$ 6his concep0
helps acco&n0an0s 0o -e0ermine ma0eriali0# o' an i0em i$e$ whe0her an i0em wor0h repor0ing in
'inancial s0a0emen0s or no0
/II. 2ito!ical cot Con-ention
6his implies 0ha0 0ransac0ions are recor-e- a0 original cos0 a0 0he 0ime when 0he# are occ&rre-$
E/AMPLEA A%< <ompan# ha- p&rchase- a 8ehicle ! #ear ago 'or E!000$ (ow 30an+ic %an/
can presen0 0ha0 8ehicle a0 E!000 4as 0he cos0 o' asse05 in i0s c&rren0 +alance shee0$
/III. Dualit% Conce)t
Accor-ing 0o 0his concep01 e8er# 0ransac0ion has 0wo e''ec0s or aspec0s an- we ha8e 0o recor- 0he
+o0h e''ec0s an- aspec0s o' 0he 0ransac0ion$ E8er# 'inancial 0ransac0ion has 0wo e''ec0s some0hing
alwa#s Bgi8esB an- some0hing alwa#s1 recei8es1 we ha8e 0o recor- 0he +o0h aspec0s o' a
0ransac0ion$ Do&+le en0r# simpl# implies 0ha0 each 0ransac0ion sho&l- +e recor-e- 0wice in 0he
+oo/s o' acco&n0s
E/AMPLEA A 'irm p&rchase- e7&ipmen0s 'or E2!00$ In 0his case1 e7&ipmen0s sho&l- +e
recor-e- in e7&ipmen0 acco&n0 an- cash in cash acco&n0$ 6here'ore1 0here are -o&+le aspec0s o'
7
0ha0 0ransac0ion an- we can sa# 0ha0 increase in Firm2s e7&ipmen0s 4Asse05 an- -ecrease in cash
4Asse05 o' 'irm
Im)o!tance o& Dualit% Conce)t
Repro-&c0ion o' acco&n0s 'rom incomple0e recor- is possi+le -&e 0o 0he 'ac0 0ha0 commercial
acco&n0ing is -one on 0he +asis o' -o&+le en0r# s#s0em an- 0here are alwa#s high chances 0ha0
one aspec0 o' 0he 'inancial 0ransac0ions wo&l- +e a8aila+le 0o 30an+ic %an/1 which can +e &se- 0o
pro-&ce acco&n0s an- 'inancial s0a0emen0s$ D&ali0# or Do&+le en0r# s#s0em helps 0race o&0 errors
an- mis0a/es in recor-ing 0he 0ransac0ions or economic e8en0s in 0he +oo/s o' acco&n0s$
Implemen0a0ion o' -o&+le en0r# s#s0em helps i-en0i'# -i''eren0 0#pe 'inancial 'ra&-s1
em+e,,lemen0s an- misappropria0ions +eca&se recor-ing a 0ransac0ion 0wice in 0he +oo/s o'
acco&n0s ma/es i0 -i''ic&l0 0o commi0 misappropria0ion
/I0. Se)a!ate Entit% Conce)t o! Buine entit% conce)t
6his concep0 'orms 0he +asis o' acco&n0ing principles or concep0s$ I0 implies 0ha0 'or acco&n0ing
K30an+ic %an/ is 0rea0e- in-epen-en0l# 'rom 0he Owners2$ 6his means 0ha0 al0ho&gh an#0hing
owne- +# 30an+ic %an/ +elongs 0o 0he owner4s5 o' 30an+ic %an/ an- an#0hing owe- +# 30an+ic
%an/ is pa#a+le +# 0he owner4s5 +&0 'or acco&n0ing p&rpose we ass&me 0ha0 30an+ic %an/ is
in-epen-en0 o' i0s owners
E/AMPLEA I' 30an+ic %an/ p&rchases a machine or piece o' e7&ipmen0G i0 will own an- o+0ain
+ene'i0s 'rom 0ha0 E7&ipmen0$ Ii/ewise1 i' 30an+ic %an/ +orrows mone# 'rom KsomeoneF i0 will
ha8e 0o repa# 0he mone#$ 6his someone incl&-es e8en owner o' 0he +&siness$
Im)o!tance o& Buine entit% conce)t o! Se)a!ate Entit% Conce)t
%&siness en0i0# concep0 is signi'ican0 since i0 'orms a +ase or 'o&n-a0ion 'or o0her acco&n0ing
concep0s or principles$ %&siness en0i0# concep0 helps -e0ermine 0he 0r&e an- 'air 8iew or 'inancial
posi0ion o' 30an+ic %an/ +# ma/ing 30an+ic %an/ as an in-epen-en0 en0i0#1 which implies 0ha0
personal proper0# o' owners -oes no0 ge0 co&n0e- while preparing 0he 'inancial s0a0emen0s$ I0 is
help'&l in -e0ermining 0he 0r&e 'ig&re o' pro'i0 or loss 'or an acco&n0ing perio- since ownerFs
personal e9penses an- re8en&es are o8erloo/e-
Concluion
In -rawing &p acco&n0ing s0a0emen0s1 whe0her 0he# are e90ernal B'inancial acco&n0sB or in0ernall#
'oc&se- Bmanagemen0 acco&n0sB1 a clear o+>ec0i8e has 0o +e 0ha0 0he acco&n0s 'airl# re'lec0 0he
0r&e Bs&+s0anceB o' 0he +&siness an- 0he res&l0s o' i0s opera0ion$ 6he 0heor# o' acco&n0ing has1
8
0here'ore1 -e8elope- 0he concep0 o' a "true and fair view"$ 6he 0r&e an- 'air 8iew is applie- in
ens&ring an- assessing whe0her acco&n0s -o in-ee- por0ra# acc&ra0el# 0he +&siness2 ac0i8i0ies$ 6o
s&ppor0 0he applica0ion o' 0he B0r&e an- 'air 8iewB1 acco&n0ing has a-op0e- cer0ain concep0s an-
con8en0ions1 which help 0o ens&re 0ha0 acco&n0ing in'orma0ion is presen0e- acc&ra0el# an-
consis0en0l#$
Re&e!ence
In0erna0ional Acco&n0ing 30an-ar-s %oar- 420075A In0erna0ional Financial Repor0ing 30an-ar-s
2007 4incl&-ing In0erna0ional Acco&n0ing 30an-ar-s 4IA340m55 an- In0erpre0a0ions as a0 1 Dan&ar#
200751 Ie9is(e9is1 I3%( 1H)22)H1.13H.
Original 0e90s o' IA3/IFR31 3I< an- IFRI< a-op0e- +# 0he <ommission o' 0he E&ropean
<omm&ni0ies an- p&+lishe- in O''icial Do&rnal o' 0he E&ropean :nion
h00pA//ec$e&ropa$e&/in0ernalLmar/e0/acco&n0ing/iasLen$h0mMa-op0e-Hcommission
<ase s0&-ies o' IFR3 implemen0a0ion in %ra,il1 =erman#1 In-ia1 Damaica1 *en#a1 Pa/is0an1 3o&0h
A'rica an- 6&r/e#$ Prepare- +# 0he :ni0e- (a0ions In0ergo8ernmen0al Nor/ing =ro&p o' E9per0s
on In0erna0ional 30an-ar-s o' Acco&n0ing an- Repor0ing 4I3AR5$
Nile# =&i-e 0o Fair Val&e :n-er IFR31 Dohn Nile# O 3ons$
Ashish * %ha00achar##a 4. Fe+r&ar# 20105$ BIFR3A 0ransi0ion -a0e will +e april 11 2011B$
%&siness 30an-ar-$ Re0rie8e- 2 A&g&s0 2013$
IFR3 De8elopmen0s in Dapan1 Oc0o+er 2011
8an -er Plaa0s1 Eri/G (ag#1 Da8i-G <rnomar/o8ic1 Ale/san-arG =ra+ner1 =erhar-G *ogler1
=eral-G Co-gson1 E--ieG <orrigan1 Pa0ric/G McEn0ee1 E-war- 420075$ BRepor0 on 0he
O+ser8ance o' 30an-ar-s an- <o-es 4RO3<5A 6he Rep&+lic o' Mon0enegroB$ Norl- %an/$
Pricewa0erho&se<oopers 420105$ BMon0enegroB$ Re0rie8e- 21 D&ne 2012$
9