Chapter 2 quesions: the primary objecive of external inancial reporing is to provide inancial informaion about a business to help external paries, primarily investors and creditors, make sound inancial decisions in their capacity as capital providers. Retained earnings refers to the accumulated earnings of a company that are not distributed to the shareholders and are reinvested in the business. It is important to have accouning assumpions because then all inancial report can be prepared following the same guild ines thus making sure that the inancial reports are similar and can be compared. Meanwhile a current raion lower than one indicates that the company is not liquid: an account is a standardized record that organizaions use to accumulate the monetary efects of transacions on each inancial statement item. Accounts are used in the accouning system in order to keep track of the low of money and how it changes as each transacion occurs.