1. Are financial accounting statements useful to investors? 2. Describe and discuss the historical cost convention 3. Critically evaluate marginal and absorption costing

1. Are fiscal accounting statements personaful to investors?

1.1 Introduction

Financial accounting statements atomic number 18 summaries of monetary selective information about an enterprise and are employ in an attempt to help make informed decisions in the present and future.

Financial statements portray the effects of transactions and other events by grouping them into broad classes (or elements) according to their economic characteristics.

The three raw material financial statements are the balance sheet, the income statement and the cash scarper statement. There are many different entities that utilise financial statements. Financial statements may be drawn up for occult individuals, non-profit organisations, manufacturers and service industries. Three major groups that take advantage of the public utility company of financial statements are large corporations, investors and the government.

Financial statements play a determinative role in each of these entities financial decisions. Corporations decide how more than assurance to extend to customers and how much(prenominal) should be distributed to investors in dividends. Investors use a companys financial statements to decide whether or not it would rise up advantageous to invest their money, and if so, how much. The government uses financial statements to determine how much an entity is required to pay in taxes.

Each decision as tell above does not always require the same financial statement, however.



A balance sheet would be used in the decision-making process for assessing a competing firm and determine a customers credit limit. It provides the user with data about available resources as wellspring as the claims to those resources. An income statement would prove utilitarian in determining credit extension to customers, distribution of dividends, taxes and investment opportunities. It provides the user with data about the profitability of the enterprise detailing sources of revenue and the expenses which minify profit.

A cash flow statement would be a useful tool in each instance because it...

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