Purchase Solution

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

Not what you're looking for?

Ask Custom Question

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.

Purchase this Solution
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.

Solution Preview

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 provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
Recent Feedback
  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
  • "Very attentive to detail. Answers are designed in easy to understand format."
  • "Fast response and thorough answer"
  • "thank you very much! "
  • "thank you so much !!!!!!!"
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Operations Management

This quiz tests a student's knowledge about Operations Management

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Purpose and types of notes to financial statements

    Instructions: (a) Are notes considered as part of the financial statements and what basic purpose do they serve? (b) What are the general types of notes? (a) Notes are an integral part of the financial statements of a business enterprise.

  • This posting addresses Enron's accounting practices.

    The purpose of accounting and finance is not to keep income up. The purpose of accounting and finance, at it's most primary level, is to record all monies coming into, and going out of the business.

  • Explanation of Generally Accepted Accounting Practices (GAAP)

    568739 Explanation of Generally Accepted Accounting Practices (GAAP) What are the generally accepted accounting principles? Why do we need GAAPs? What is the purpose and goal for this practice? What is the challenge of using this practice?

  • Language of business, purpose of GAAP, adjusting entries, closing entries

    Who currently develops and issues GAAP? What is the purpose of GAAP? 3. Why are adjusting entries necessary? 4. The analysis process for preparing adjusting entries involves two basic steps.

  • The Purpose of Accounting

    319321 Define the purpose of accounting and identify the four basic financial statements Define the purpose of accounting and identify the four basic financial statements.

  • This post addresses GAAP, bad debt, and related issues.

    GAAP is a large compilation of the concepts, principles, procedures, and regulations that have been developed by the Financial Accounting Standards Board (FASB). Three main sources of GAAP are used.

  • Govt & Not-forProfit

    ¢ basic financial statements include two separate but related sets of statements. 1. What are these two separate but related sets of statements? What are their different purposes? What is the fundamental difference between the two?

  • Deferred Tax Liabilities and Assets

    The objectives of accounting for income taxes in general purpose financial statements are examined.

  • Analysis of Government-wide and government fund statements

    Designed to communicate in narrative, easily readable form the purpose of the basic financial statements and the government's current financial position and results of financial activities compared with those of the prior year, government-wide financial

View More Related Solutions