COMMERCE 2AB3 Lecture Notes - Lecture 2: Income Statement, Cash Flow Statement, Income Tax
2 Apr 2015
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The basic objective of accounting is to provide (stakeholders) with useful information about a business enterprise in order to help them make rational economic decisions. In order for accounting information to be characterized as useful, it should have two primary characteristics: relevance and reliability. Information has the quality of relevance when it is capable of making a difference in the economic decisions of users. Information has the quality of reliability when the information can be trusted and hence depended upon by the users. Want to know if they should hold, buy more, or sell their shares in a particular company. (cid:88) potential investors: (cid:88) creditors: (e. g. , suppliers, banks, etc. ) Want to know if a company is a good investment. Want to know if they should extend credit to the firm, how much to extend, and for how long. Financial statements (cid:88) income tax authorities: (cid:88) others . (e. g. , financial analysts, labor unions,
