Final Afm Ppt

8/8/2019 Final Afm Ppt

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LIMITATIONS OFFINANCIAL STATEMENT

AND WINDOW DRESSING

PRESENTED BY:

AKANKSHA SINGH

ANOOLEKHA ATRI

ASHISH SHUKLA

MUKESH KUMAR

RICHA MAKIN


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CONTENTS

FINANCIAL STATEMENT

LIMITATIONS OF FINANCIAL STATEMENT

WINDOW DRESSING


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EVERY FIRM LIKES TO MEASURE THE PERFORMANCE OF ITS

BUSINESS OPERATIONS IN TERMS OF PROFIT OR LOSS.IT ALSO LIKES

TO KNOW THE VALUE OF ITS ASSETS AND LIABILITIES ON THE

CLOSING DATE OF ACCOUNTING PERIOD.

THUS THE STATEMENT PREPARED TO ASCERTAIN THESE ARE

KNOWN AS FINANCIAL STATEMENT. THEY ARE THE FORMAL

RECORDS OF FINANCIAL ACTIVITIES OF A BUSINESS , PERSON OR

ORGANIZATION.

FINANCIAL STATEMENTS PROVIDE AN OVERVIEW OF A BUSINESS OR

PERSONSS FINANCIAL CONDITION IN BOTH SHORT AND LONG TERM.

FINANCIAL STATEMENT


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TYPES OF FINANCIALSTATEMENT

BALANCE SHEET

INCOME STATEMENT


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It is referred to as statement of financialposition or condition, reports on a companysassets and liability and net equity as of a given

point in time.

BALANCE SHEET


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INCOME STATEMENTS:

It is referred to as profit and loss statement,

reports on a companys income, expenses andprofits over a period of time. Profits & loss

account provide information on the operation of

the enterprise. These includes sale and thevarious expenses incurred during the processing

state.


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LIMITATIONS OFFINANCIAL

STATEMENT


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measures only the quantitative factsof the business in terms of money.

change in managerial position are notdisclosed.

1. IGNORES QUALITATIVEASPECTS


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2. BASED UPONCONVENTION AND PRACTICE

Financial statements are prepared according tothe practices adopted by individual firms.

Accounting is criticised for its convention ofconservatism


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3.IGNORESHUMAN RESOURCES

Financial statements do not accord anyweightage to human resources.

Doesnt reveal the non financial items likeefficiency of management, loyalty of work force,quality of product.


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4.IGNORESPRICE LEVEL CHANGES

Changes in the price are quite obvious underinflation and depression but financialstatements ignores it.

Changes are not incorporated in financialstatements.


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6.FAILS TO DISPLAYPROFITABILITY,EFFICIENCY AND

FINANCIAL SOUNDNESS OF THE

BUSINESS.Financial statements do not presents the financialratios concerning the performance of the business.


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7. FAILS TO HIGHLIGHT THEINFLOW AND OUTFLOW OFFUNDSIn order to highlight the sources and application offunds, a firm has to prepare funds flow statement.

As financial statements fail to display it.


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THEBUSINESS ISBADBUT YOUCAN DRESS IT UP WITH

SOMETHING TO SHOW IT TOBE

HEALTHY-WINDOW DRESSING


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Accounting Data

Account Balancing

Financial Statement Prep

First Level ofCooking

Final Cooking

Window Dressing


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AN ADJUSTMENT MADE TO PORTFOLIO OR

FINANCIAL STATEMENT TO CREATE FALSEAPPEARANCE.

ITS A BAD PRACTICE AND A LIMITATION TO

FINANCIAL STATEMENTS.


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Window dressing refers to attempts bybusiness to present its accounts in the best

light

Has become more of a necessity as pressureto please shareholders

It is NOT illegal


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Assets are valued at historical cost less an

estimated depreciation

Other possibilities include cost, netrealizable value, replacement cost, price level

adjusted

Not all assets appear

Human capital, internally generatedgoodwill

Could be argued that approach is more

conservative


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METHODS OF WINDOW DRESSING

SALE & LEASEBACK

SHORT TERMBORROWING

CHASING DEBTORS

CHANGING DEPRECIATION POLICY


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UNLESS YOU HAVE ACLOSER LOOK ,

ITS IMPOSSIBLE TO GET

RID OF IT.


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THANK

YOU

Final Afm Ppt

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