Income Statements Essay Example

As per the Enterprise Theory of Accounting, a company is an independent legal entity and holds the autonomy to make decisions irrespective of borrowing capital from banks or stockholders. Even though the stockholders are actual owners of the company assets, they cannot interfere in the business operations without the consent of executive leaders. The CEO shares management and performance results with stockholders only in certain periodic meetings.

The issue of whether managers and directors act as stewards or not has arisen due to the principle of agency. Methods have been developed to provide owners with assurance about management's performance. Financial Statements are how companies communicate their condition during the financial period. By examining the numbers in financial statements, questions such as the company's growth, resource utilization, and investment safety can be answered. Financial statements serve as a report card for companies