General Purpose Financial Statements (2024)

FAQs

What are the limitations of general purpose financial statements? ›

Limitations of general-purpose financial statementsinclude the periodic nature of statements, statements not being realistic, lacking objectivity due to personal judgment, reporting only financial matters, and no suggestive approach.

General purpose financial statements not only help businesses to fulfil their obligations to stakeholders, such as shareholders, lenders, regulators, and investors. They also provide stakeholders with a comprehensive and transparent view of a company's financial position, performance, and cash flows.

General-Purpose financial statements are prepared primarily for external users. They provide financial reporting information to a wide variety of users -- shareholders, creditors, suppliers, employees, and regulators. General purpose financial statements provide at the least cost the most useful information possible.

General purpose financial statements are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs.

Limitations of Financial Reports – normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements.

GPFS must comply with all applicable accounting standards, and they are typically prepared on an annual basis. Special purpose financial statements (SPFS) are prepared for a specific purpose or for a limited group of users.

Types of Financial Statements: Income Statement. Typically considered the most important of the financial statements, an income statement shows how much money a company made and spent over a specific period of time.

Financial accounting is the branch of accountancy that focuses on the preparation and presentation of financial statements for external users, and it provides information to investors, creditors, and other stakeholders to assess the financial health and performance of an organization.

The General Purpose Financial Report presents an overall picture of the financial performance of the Central Public Sector Enterprises (CPSEs) which are under the audit jurisdiction of the Comptroller and Auditor General of India (CAG).

What are the quality of financial statements? ›

What makes a financial statement useful? FASB (Financial Accounting Standards Board) lists six qualitative characteristics that determine the quality of financial information: Relevance, Faithful Representation, Comparability, Verifiability, Timeliness, and Understandability.

Consolidated financial statements may face limitations when it comes to capturing the value of intangible assets. Intangible assets, such as patents, trademarks, copyrights, and brand value, are often critical to a group's success but can be challenging to quantify accurately.

Income statements have several limitations stemming from estimation difficulties, reporting error, and fraud.

Four major limitations of financial accounting are historical perspective, subjectivity in valuation, aggregation of data, and omission of inflation effects.