According to recent reports, the need to make educated choices is becoming more important. Organizations are gradually recognizing the value of gathering important and accurate knowledge in order to make educated decisions. This draws attention to both internal and external intelligence sources. The organization's team is charged with conducting studies and analysis on different intelligence sources and reporting on what they have discovered to be useful for decision-making. Internal sources are valuable because they allow the company to improve its internal processes and ensure that they operate smoothly. Of the internal sources, the financial statement provides important information which portrays the organization's performance. It also provides an avenue where the organization is able to compare information with the past and cross-sectional organization to be able to evaluate actual performance.
A Financial statement is a record of all the financial transaction that happen within an organization within a particular period. In Accounting Experts Solution, financial statements will help the organization be able to record all transactions and consolidate to be able to obtain information for decision-making and records purposes. According to Barata, Cain, & Thurston (1999) financial records play an important role in ensuring that resources available in the organization are well utilized, the organization is informed of where it obtains its finances and how it is being utilized, the organization is aware of the outstanding debt and how it intends to clear and in providing a status of the financial position of the organization. This enables the decision makers be able to properly gauge where the organization is headed and be able to plan accordingly.
Since the financial statements provide financial records for a set financial period there is need for adjustment to cater for any changes that might come up to make sure that the information is complete. Accounting Expert Solutions has been recording the invoices issued and received. This means that they have not been factoring in any changes that might be material and have an effect on the financial position. It is an intentional omission by the Chief financial officer who fails to consider its importance. Failure to consider the changes lead to misrepresentation and ultimately leads to understatement and overstatement of income and expenditures.The adjustments are important mainly because the aid the organization be able to cater for transaction which could affecting more than one financial year. This is done to ensure that each transaction is recognized in the relevant period which it occurred.
The adjustments need to be done on five areas which include prepaid expenses, accrued revenues and expenses, depreciation and unearned revenues. Prepaid expenses are expenses which its payment has been made for but its point of occurrence is at a future day. This is done to ensure that the expenses paid for but not utilized are not considered as expenses but as a current asset until the time when they will be incurred. Accrued revenues is income for a sale or service provided but the payment for the transaction has not yet been received in the current year. Accrued expenses are expenses which have been incurred in the current period but the organization is yet to receive payment. Unearned revenue is a section of payment received that service or product sale has not yet been provided. The four categories have a significant impact on the financial records of Accounting Experts Solutions.
The adjustments need to be considered before finalizing in the financial statements preparation. It will help in establishing the actual incomes earned and expenses incurred in a particular financial period. This will help the organization to avoid the element of having creative accounting which is fraudulent. Without adjustment incomes and expenses will be recorded and omitted which could have affected the status of the financial statement. It is also important in decision-making because it enables the finance team to be able to determine the amount which is payable and the amounts receivable. This then makes it easier for the organization to classify it debtors and creditors correctly. Adjustment of expenses and incomes will also enable the organization be able to correctly calculate profits that the organization has earned in a particular period and the cost of doing business. This will form a good background that the organization can use to make decisions. The adjustment has an impact on financial ratios because the valuation is not well done and has not considered all incomes and expenses in determining the current asset and liabilities. This will translate to having misleading information which cannot be used in determining financial ratios.
It is important to consider the adjustments to be able to develop complete set of financial information which is accurate and up to date. This will be an asset as the decision-making and analysis will be easier therefore one can monitor performance of the organization. The organization should implement the various policies to ensure that all the adjustments have been considered.
Work Cited
Barata, Kimberly, Piers Cain, and Anne Thurston. "From Accounting to Accountability: Managing Accounting Records as a Strategic Resource." (1999): 46-53.
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