Users Of Accounting Information
PART A
Lenders have no use for the Income statement and the Balance sheet with information relating to past transactions or events for making decisions unless they are accurate.
The Balance sheet is a “statement at one point in time, which shows all the resources controlled by the entity and all the obligations due by the entity.” (Bazely, 2007, p90) Hence it merely provides an outline of the financial strength and asset liquidity of an entity.
The Income statement “summarizes certain transactions that take place during a period of time.” (Bazely, 2007, p125) Hence the income statement provides some of the basic financial information for rational decisions to be made.
Lenders are “people and organizations who lend money in order to earn a return on that money.” (Bazely, 2007, p8) Therefore they are interested in ensuring whether the entity is going to provide with a return due to the entity making sufficient profit.
Therefore even if the balance sheet and income......
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