An employee of Best Shoes Ltd. embezzled Rs. 4,50,000 during the year ended 31st March 2006. The company, instead of treating this amount as a loss, showed it as recoverable from the employee in its balance sheet. The net profit of the company for the year was Rs. 6,54,78,506. Do you think that this treatment makes any material impact on the assessment of the profitability of the company?

1. There may be information required by users, other than investors, which may not be available in the financial statements. Visualize such information needs for each of them. How can they get such information?
2. What are the objectives purported to be served by the financial statements? How do they meet the financial information needs of their various users?
3. Get annual report of a company. Look for the “Schedule of Notes to Accounts and Accounting Policies”. What kind of financial information does it contain? How does it supplement the information provided by the three main statements?
4. ;Is accrual basis superior to cash basis in meeting the economic decision-making needs of the users of financial statements? Why or why not?
5. ;Qualitative characteristics are the attributes that make the information contained in the financial statements useful to the users.” Examine this statement. Specially discuss the need for and implications of comparability in this context.