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Nik Muhammad Firdhaus bin Mohd Razif


Bachelor of Business Administration

Accounting 2

Lecturer Name:
Mr. Vasant

1.1 Objective of financial statements and their use to investors
Financial statements is a summary report that shows how a firm has used the funds
entrusted to it by its stockholders (shareholders) and lenders, and what is its current financial
First objective is assessment Of Past Performance. Past performance is a good
indicator of future performance. Secondly is assessment of current position. Financial statement
analysis shows the current position of the firm in terms of the types of assets owned by a
business firm and the different liabilities due against the enterprise. Thirdly is prediction of
profitability and growth prospects. Financial statement analysis helps in assessing and predicting
the earning prospects and growth rates in earning which are used by investors while comparing
investment alternatives and other users in judging earning potential of business enterprise.
Financial Statements provide useful information to a wide range of users:
Managers require Financial Statements to manage the affairs of the company by
assessing its financial performance and position and taking important business decisions.
Shareholders use Financial Statements to assess the risk and return of their investment in the
company and take investment decisions based on their analysis.
Customers use Financial Statements to assess whether a supplier has the resources
to ensure the steady supply of goods in the future. This is especially vital where a customer is
dependent on a supplier for a specialized component. Employees use Financial Statements for
assessing the company's profitability and its consequence on their future remuneration and job
security. Competitors compare their performance with rival companies to learn and develop
strategies to improve their competitiveness.

1.2 Regulatory system
A system created and designed to police certain individuals, practices, firms, or
markets. The reason for this is to bring them into conformity with rules designed to create fair
practice. One example of a regulatory system would be the U.S. financial regulatory system,
comprised of organizations such as the Federal Reserve and the Securities and Exchange

1.3 The impact on global financial reporting requirements
The first impact is preparations. The major preparation costs relate to maintaining
and reconciling the ledger accounts that need to be kept for each disclosure and compiling the
information in accordance with the presentation requirements included in financial reporting
The second impact is assurance. The main factors that determine the gross cost of
an audit are the size of the entity, the range and nature of the activities it carries out, and the
complexity of its transactions. Assurance costs include a fixed and a variable cost element.
The third is distribution. In most cases, the cost of distributing GPFR to owners or
members is very small compared with the benefits and other costs of financial reporting.
Many of the benefits and costs broadly outlined above will arise from the
decisions that the Government will make in relation to the matters addressed in this RIS.
However, other costs and benefits will depend on decisions that the XRB make. The XRB will
make two main decisions.

1.4 Logical Conclusion
Financial statements are summaries of monetary data about an enterprise. The
most common financial statements include the balance sheet, the income statement, the statement
of changes of financial position and the statement of retained earnings. These statements are used
by management, labor, investors, creditors and government regulatory agencies, primarily.