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Accounting

ACC 205 Financial Statements and There Importance in Outside Interests

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Financial Statements and There Importance in Outside
Interests
Financial Statements and There Importance in Outside Interests
ACC 205
Financial statements are used in accounting to give an accurate
representation of the financial health of a given business or entity. These
statements and their underlying importance of accuracy cannot be
overlooked. It is of the utmost importance for a business to present
accurate financial statements not only to meet reporting requirements
internally, but also to satisfying outside reporting expectations. This is
particularly crucial when it comes to outside business interests because
potential investors and potential lenders need to access financial
statements in order for them to make decisions based on the financial
status and overall performance of the business. Accurate financial
statements are also important for regulatory authorities as well as
government bodies (Homgren, C. Harrison, W. & Oliver, M. 2012). The
laws created around financial statements make it clear that companies
should make submissions of all their financial statements on an annual
basis. Tax authorities also must have access to financial statements in
order to looks at profits and if the correct amount of taxes are being paid.
When lenders or investors are evaluating a business they use the
information from the financial statements to look at the profitability or
lack thereof. By looking at this they are able make decisions based
things such as the likely hood of repayment of a loan and debit
obligation or potential investment into the company. “Business
transactions or events can pose ethical challenges. Accountants must be
honest in their work. Only with complete and accurate information can
help people make wise decisions” (Homgren, C. Harrison, W. & Oliver,
M. 2012).
The financial statements are prepared in order of income statement,
statement of owner's equity, and balance sheet. The income statement is
important for accountants to prepare accurate and complete financial
statements because other people rely on the data to make decisions

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