What is the objective of financial reporting?
A) Provide information that is useful to management in making decisions.
B) Provide information that clearly portrays nonfinancial transactions.
C) Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors.
D) Provide information that excludes claims to the resources.

Question

Quizplus · Accepted Answer

The primary objective of financial reporting is to provide users with information about the reporting entity that is useful for making decisions. This includes equity investors, lenders, and other creditors who need to assess the entity's financial health and potential for future profitability. While financial reporting may also be useful for management decision-making (choice A), it is primarily geared towards external users. Financial reporting may also include information about nonfinancial transactions (choice B), but the main focus is on financial transactions and results. Reporting should include claims to the entity's resources, not exclude them (choice D), as this is a key aspect of financial health and risk assessment.

What Is the Objective of Financial Reporting