Chapter 4 introduction - Chapter 4 Introduction- Financial...

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Chapter 4 Introduction- Financial Reporting Conventions Lecture 1 Objectives 1 and 2 Objective 1: Describe the objectives and qualitative characteristics of financial reporting and the ethical responsibilities that financial reporting involves. Up to now, we have been concerned primarily with accounting from the perspective of how the information is put together. In this next segment, our focus changes to how to interpret that information that we assembled. To do so, we need to discuss the objectives of financial reporting, and then how those objectives will shape the way that information is communicated. Needles discusses these objectives on page #232. The main purposes of financial accounting are: To furnish information that is useful in making investment and credit decisions; To provide information useful in assessing cash flow prospects, and; To provide information about business resources claims to those resources, and changes in them. Note that the emphasis of these objectives is on the communication information that is useful to decision-makers that may not be intimately familiar with the business in question. And, for that information to useful, it should be presented in a common form that the users can comprehend. To enhance that comprehension, the accounting profession has developed qualitative standards for financial reporting.
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Of critical importance is to appreciate that accountings an inexact science, which the information that is presented is not, nor can it, be, entirely accurate. In
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Chapter 4 introduction - Chapter 4 Introduction- Financial...

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