The financing, investing, and operating activities of a company are recorded by accounting
systems in the form of detailed transactions. To effectively communicate a company’s
activities to decision-makers, these detailed transactions are summarized and
reported in a set of standardized reports called financial statements. The role of financial
statements is to provide information that will help investors, creditors, and others
make judgments and predictions that serve as the basis for the various decisions they
make. Financial statements help to answer questions such as those shown in Exhibit 1-4.