4 The main elements of accounting information
Section 1.2 told you that results of all business transactions over a period of time need to be summarised, presented and interpreted in order to assess a business’s performance and its financial position at a given date, in the form of an income statement and balance sheet. It was emphasised in Section 3 that the presentation of financial accounting information is governed by a combination of legal requirements and accounting regulations and conventions. Different types of business entities are governed by different requirements. However, one of the rationales underlying the preparation of income statements and balance sheets is to turn raw financial data into useful information, and this is achieved in part by organising, classifying and presenting data in particular ways to make them meaningful. Here we shall look at some conventional ways of doing this.