GENERAL KNOWLEDGE

THE MAIN OBJECTIVE OF ACCOUNTING REPORT IS TO PROVIDE INFORMATION ABOUT

  • A. a company’s shareholding
  • B. an entity’s management
  • C. the efficacy of assets
  • D. a company’s economic resources ✓

 

The answer to the question is: D. a company’s economic resources

Accounting reports serve as a crucial tool for providing information about a company’s economic resources. These reports are essential for various stakeholders, including investors, creditors, management, and regulators, to make informed decisions and assess the financial health of a company. The primary purpose of accounting reports is to present a clear and comprehensive picture of a company’s financial performance, position, and cash flows over a specific period.

There are several types of accounting reports, such as the income statement, balance sheet, statement of cash flows, and statement of retained earnings. Each report focuses on different aspects of a company’s economic resources, providing valuable insights into its revenue, expenses, assets, liabilities, and equity.

  1. Income Statement: This report, also known as the profit and loss statement, highlights a company’s revenue, expenses, and net income (or loss) during a specific period. It helps stakeholders understand the company’s ability to generate profits and its overall financial performance.
  2. Balance Sheet: The balance sheet provides a snapshot of a company’s financial position at a particular point in time. It lists the company’s assets, liabilities, and shareholders’ equity, offering insights into the company’s solvency and liquidity.
  3. Statement of Cash Flows: This report demonstrates how cash is generated, used, and invested within a company. It is divided into three sections: operating activities, investing activities, and financing activities. The statement of cash flows helps stakeholders understand the company’s cash inflows and outflows, which is crucial for assessing its liquidity and ability to meet financial obligations.
  4. Statement of Retained Earnings: This report shows the changes in a company’s retained earnings over time. Retained earnings represent the profits that a company has chosen to reinvest in the business rather than distribute as dividends to shareholders. By analyzing the statement of retained earnings, stakeholders can gauge the company’s retention and reinvestment strategies.

In conclusion, accounting reports primarily focus on providing information about a company’s economic resources, which include its financial performance, position, and cash flows. This information is vital for various stakeholders to make informed decisions and assess the overall financial health of a company.

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