Prepare 700- to 1,050-words in which you define the purpose of accounting and identify the four basic financial statements. Be sure to explain how they are interrelated with each other, and why they are useful to managers, investors, creditors, and employees.
* Format your paper according to APA standards.© BrainMass Inc. brainmass.com May 20, 2020, 6:05 pm ad1c9bdddf
As per Netmba.com "The accounting process is a series of activities that begins with a transaction and ends with the closing of the books."Financial Accounting is an art of recording, summarizing and interpreting the financial transactions of an organization. It provides us the financial statements such as balance sheet, income statement and cash flow statement.
Purpose of Accounting
Financial Statements is designed primarily to assist stakeholders in deciding where to place their scarce investment resources. It is also used to help management to know the performance of organization. It is used by the external parties to take decisions, for example investor decides about the investment in the organization. Similarly lender, supplier etc. also assess the credibility of the company. Accountants summarize this information in a balance sheet, income statement, and statement of stockholder's equity and statement of cash flows.
Four Basic Financial Statements
Balance sheet provides the complete picture of the organization as on a particular date. It tells about the Assets and Liabilities of the organization. Balance sheet is designed primarily to assist stakeholders in deciding where to place their scarce investment resources. It is also used to help management to know the performance of organization. Balance sheet must be in balance because as per dual aspect principle every transaction has more than one aspect and ultimately Assets must be equal to owner's equity and outsider's liabilities. Moreover ...