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E-book Training Manual on Accounting for Micro-small and Medium-sized Enterprises
Accounting is a vital and pervasive activity in any ordered economic society. It supplies the information which decision-makers will rely on in the allocation of scarce resources. It enables the performance of the business to be evaluated and ensures that rational decisions are taken about the future operations of thebusiness. For example, the business may want to access finance in the future. It would use its financial statements as the basis for its application to a financial institution for a loan. The diagram below shows how accounting communicates the effects of the transactions which have taken place to the users of that information. The financial statements represent a means to communicate the financial position of a business (Balance Sheet) at a given date and the operating results (Income Statement) and the cash flow (Cash Flow Statement) for a specified period. The financial statements provide information about the reporting enterprise’s financial performance and financial position that will be useful to users in assessing the performance of the enterprise and the stewardship of the enterprise’s management.
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