Preparing Decision Useful Financial Reports: A Challenge for Small Businesses*
Small business owners and managers want financial reports which are useful for their own decision-making purposes as well as for fairly presenting their business to others. Accountants and auditors consistently state that financial reports are the product of management. These statements being true, small business administrators should know what constitutes fair and useful financial presentation and how to achieve those characteristics.
Accounting offers many alternatives for the treatment of financial events ( e.g., FIFO/UFO; Straight-line/ Declining Balance ). Alternatives are available in order to allow management most fairly and most usefully to present its financial reports. The characteristics which contribute to the decision usefulness of accounting information has been provided by the Financial Accounting Standards Board ( FASB ). and the FASB expects these characteristics to be considered in all financial statement preparations. However, the FASH has given no guidance for the consideration of the characteristics.
This paper offers small business administrators a rational process for systematically choosing between accounting alternative methods. The procedure is easy to understand and simple to execute. It incorporates and utilizes the characteristics which the FASB states contribute to the decision usefulness of accounting information.
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