The Purposes of Accounting and Financial Statements

Question 1

The Purposes of Accounting

Answer 1

is to provide user useful finical and non-financial information to allow them to make decisions

Question 2

What is the achieved purpose for an income statement

Answer 2

Achieved

To show the Revenue, Expenses and Net Profit for the period for the (insert name of the Business here).

Question 3

What is the merit purpose for an income statement

Answer 3

Merit
This allows (insert the user name here) to make decisions about (make up a decision relating to Revenue, Expenses or Profit related to the question)

Question 4

What are the component of an income statement

Answer 4

Components

• Income – Sales or Fees
• Other Income
• Cost of Goods Sold
• Expenses
  • Distribution
  • Administrative
  • Finance Costs
• Net Profit

Question 5

What decisions can uses make looking at profit for year

Answer 5

• Tax pay
• Ability to pay loan instalments
• Buying more assets
• Owner Drawing funds for personal use
• Ability to ask for wage rises
• better than competing companies