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Accounting remains as one of the most important fields in the corporate world. Unlike other fields, accounting has been found to offer a near perfect examination of the position of a business, despite the fact that the face value of the business may be reflecting different results. There are various philosophies that are associated with financial accounting.
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One of the philosophies of financial is that this is the only field that is able to reveal the true financial status of a business or organization. According to Stickney, Weil & Schipper (p.243), financial accounting analysis employs methods and strategies that are able to identify the profitability of a business or organization and the risk that such a business or organization face within the industry in which it is based. This analysis can also be used to explain why certain changes in the financial standing of a business or organization changes over a certain period of time.
On the other hand, it can be argued that financial accounting is not a perfect way of determining the financial ability or rather position of a business or organization. This has been proved to be true in cases where the financial accountants have failed to honor the financial accounting philosophies and ethics in their practices, an instead chosen to integrate wrong information in their calculations, thus portraying a false financial image of the company. This has been found to be true in cases where fraud has been experienced by companies, thus forcing these financial analysts of such companies to derive vague information that is meant to mislead investigators and the public in general (Hines, 1988, p.251-256). In this regard therefore, the ability of a financial accounting to portray accurate figures and convey relevant information depends heavily on the adherence to ethical practices by those that are involved in preparation of financial statements, failure to which this field will fail to meet its obligation as a financial mirror.
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