What are the Objectives of Financial Reporting?

    The objectives of financial reporting cover three areas, dealing with useful information, cash flows, and liabilities. The objectives are noted below.

    Provide Useful Information

    The first objective is to provide useful information to the users of financial reports. The information should be useful from a number of perspectives, such as whether to provide credit to a customer, whether to lend to a borrower, and whether to invest in a business. The information should be comprehensible to those with a reasonable grounding in business, which means that it should not be laced with jargon or burdened with so much detail that it is impossible to extract the essentials about a business from its financial statements.

    Provide Cash Flow Information

    The second objective is to provide information about the cash flows to which an entity is subjected, including the timing and uncertainty of cash flows. This information is critical for determining the liquidity of a business, which in turn can be used to evaluate whether an organization can continue as a going concern.

    Provide Liability and Economic Resources Information

    The third objective is to disclose the obligations and economic resources of an entity. There should be an emphasis on the changes in liabilities and resources, which can be used to predict future cash flows.

    Source of the Financial Reporting Objectives

    The preceding objectives were developed within the framework of a capitalist society, where accurate and complete information is needed in order to operate efficient capital markets. This list is an expanded version of the objectives set forth by the Financial Accounting Standards Board (FASB). The FASB assumed that creditors and investors would be the primary users of financial reports, and so developed a list of objectives that matches their needs.

    Which of the following is the primary objective of financial reporting?
    The primary objective of financial reporting is to provide information. Useful for making investment and credit decisions. more
    What is a report and types of report?
    Reports are well researched, planned and organized documents that are written for a purpose. A report is written for a specific audience; it must always be accurate and objective. It is a concise document based on research that typically analyses a situation and sometimes makes recommendations. Wendy. more
    Is Consumer Report same as credit report?
    A credit report will document which accounts are in good standing, if any debts are past due, and other information about your financial history. A credit report, however, is a type of consumer report. A consumer report is a broader report that contains personal identifying information beyond credit. more
    What is report and type of report?
    Reports are well researched, planned and organized documents that are written for a purpose. A report is written for a specific audience; it must always be accurate and objective. It is a concise document based on research that typically analyses a situation and sometimes makes recommendations. Wendy. more
    What is formal report and informal report?
    Formal and informal reports are the two most common types of business reports. When a report is highly structured and is relatively long in size, it is called a formal report. On the other hand, when a report is less structured and is short in size, it is called an informal report. more
    What is long report and short report?
    A long report is generally commissioned by a company or an agency to explore with extensive documentation a subject involving personnel, locations, costs, safety, or equipment. A short report is often written as a matter of routine duty, with the writer sometimes given little or no advance notice. more
    What is report report type?
    Types of reports include memos, meeting minutes, expense reports, audit reports, closure reports, progress reports, justification reports, compliance reports, annual reports, and feasibility reports. more
    What is true about an incident report sometimes called an occurrence report or variance report )?
    An incident report, also called a variance or occurrence report, is used by health care agencies to document the occurrence of anything out of the ordinary that results in, or has the potential to result in, harm to a patient, employee, or visitor. more
    What kind of report is daily activity report?
    An automated daily activity report is generated by an automated time tracking software that tracks all your time like work time, productive time, unproductive time, idle time, shift time, etc. After capturing all the data makes an automated report for employees. more
    What is short report and long report?
    A short report is generally called an informal report while a long report is usually referred to as a formal report. Long reports present a range and an in-depth view of a problem or idea. It also requires lots of studies and is much more widespread. more
    What is external report and internal report?
    Internal financial reports are designed to be viewed only by individuals within the organization, whereas external financial reports can be accessed by any person outside the organization. more

    Source: www.accountingtools.com

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