The Role of Accounting on Business and Our Society 1
The Role of Accounting on Business and Our Society
Adrian Smith
Accounting 100
Prof. Eric Osei
The Role of Accounting on Business and Our Society 5
A Financial statement is a record of financial activities of a business entity. Main
objective of financial statements is to provide information about financial position, performance
and changes in financial position, and flows of cash in the business organization which in turn is
essential in making decisions. In order for financial statements to provide the necessary
information, they have to abide by the principles of understandability, relevance, reliability and
comparability (Alexander et al, 2005).
The first financial statement under consideration is statement of financial position. It is
used to report on assets, liabilities, and capital of an entity. Assets are resources which have
economic value attached to them, for example cash, debtors and inventory. Liabilities on the
other side include creditors, deferred tax and accruals. Finally, capital is the owner’s equity.
