The Stocks Accounting Evaluation And Estimation Influence On The Entity Performance

Improving the performance of a company involves an operative and accurate measurement of the efforts and effects, the efficient use of the company resources and also identifying ways to reduce consumption, a category in which stocks occupy a significant position. The purpose of this article is to demonstrate that the accounting information on stocks can not rely only on the accuracy assessment of past and current events, but must take into account estimations of future events, even if these involve uncertainty and risk taking. Different methods for evaluating stocks at the exit of the entity lead to different results but does not affect the entity performance. Opposed to the evaluation, when we speak about the accounting estimation, there is a significant freedom of action when choosing methods. The economic entity is always in the present, and for this reason it must take into consideration both the evaluation accuracy and the accounting estimations uncertainty. Estimating the net achievable value is influenced by the purpose for which the inventory is held. Accounting estimations are influenced by the judgment which is sometimes subjected to inherent bias, but this bias should not turn into a form of manipulating the entity's performance.