文档介绍：A. Measuring Business e
a. explain why financial statements are prepared at the end of the regular accounting period.
Major Financial Statements:
The balance sheet: provides a "snapshot" of the firm's financial condition.
The e statement: reports on the "performance" of the firm.
The statement of cash flows: reports the cash receipts and cash outflows classified according to operating, investment and financing activities.
The statement of stockholder's equity: reports the amounts and sources of changes in equity from transactions with owners.
The footnotes of the financial statements: allow uses to improve assessment of the amount, timing and uncertainty of the estimates reported in the financial statements.
The most accurate way to measure the results of enterprise activity would be to measure them at the time of the enterprise's eventual liquidation. Business, government, investors, and various other user groups, however, cannot wait indefinitely for such information. If accountants did not provide financial information periodically, someone else would.
The periodicity or time period assumption simply implies that the economic activities of an enterprise can be divided into artificial time periods. These time periods vary, but the mon are monthly, quarterly, and yearly.
The information must be reliable and relevant. This requires that information must be consistent parable over time and also be provided on a timely basis. The shorter the time period, the more difficult it es to determine the e for the period. A month's results are usually less reliable than a quarter's results, and a quarter's results are likely to be less reliable than a year's results. Investors desire and demand that information be quickly processed and disseminated; yet the quicker the information is released, the more it is subject to error. This phenomenon provides an interesting example of the trade-off between relevance and reliability in preparing financial data.
In practice,