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    What is the purpose of accounting and what are the basic financial statements?

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    Prepare a 700-1,050-word answer 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. Cite at least one reference.

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    Attached is the answer.

    The purpose of accounting is to provide financial information about the organization which helps various stakeholders's to take financial decisions in relation to the company. Financial Statements provides the overview of the financial condition of the business. The purpose of the financial instrument is to provide information about the financial position, performance and changes in financial position of the firm. It helps the investors to assess the credibility of investing in a business and helps them in their investment decision. It also helps the analysts in judging the viability of the company and make financial forecast about the firm. A financial statement shows a summary of all the transactions that flow in an organization for a given period of time. A financial statement also helps in the comparison of the firm with other firms within the same industry and also facilitates comparison with the industry averages. There are four key sections which makes the financial statements are:

    1. Income Statement
    2. Balance Sheet
    3. Cash Flow statements.
    4. Notes to the financial statement.

    Summarized below is a discussion on some of the key highlights of the four sections mentioned above:

    1. Income Statement: The income statement of the company shows how much revenue and profit the company has generated over a certain period. It shows the sales, cost of sales, operating and non operating ...

    Solution Summary

    This solution discusses the income statement, balance sheet, and cash flow statements as well as stakeholders and users of financial statements in order to help the student build an argument about the purpose of accounting. This solution is 931 words.