Financial Accounting

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Category: Business and Industry

Date Submitted: 09/28/2012 02:16 PM

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Hello everyone

Our debate topic is financial accounting serves an important role in society by providing information that is useful to investors

We are pro this statement.

The goal of financial accounting is to provide financial information about an entity that is useful to investors and other users.

Information needs to have two main characteristics to make it Useful information: it must be relevant and reliable. If financial information is useful information investing decisions will be affected by it.

Relevant information is required to have predictive value about a firm’s future performance. Financial information meets this requirement. As financial information can be used as an input to predict how a firm will perform in the future.

Reliable information is said to faithfully represent without bias what it is intended to represent. Yes firms have a choice between which accounting standards and policies they choose to utilize when making financial statements and this allows them to manipulate net income. These policies and standards utilized though must be disclosed to the public therefore investors can see the affect that each policy has on net income and take it into account. Financial information must adhere to certain accounting policies and standards, and these standards utilized must be reported in the annual report. Through accounting standards and policies financial information is ensured to be reliable information.

Furthermore, financial information is verifiable, as long as the accounting policies utilized are disclosed, another accountant will be able to calculate the same net income number in the financial statements.

Therefore, financial information is useful information as it is both relevant and reliable. This means investors will take financial information into account when making investing decisions.

Both the ball and brown study and the beaver study confirm this by demonstrating that investing decisions are affected by...