Objectives of a Business Enterprise

It is commonly known that a business enterprise cannot hope to accomplish anything else and continue to exist, unless it meets the two basic tests of survival- operate profitably and stay solvent.

Businesses are formed to make profit

Usually, organizations may be grouped into two- the profit oriented and non-profit oriented organizations. As its name suggests, the primary objective of organizations that fall under the profit-oriented enterprise is to make profit, and these organizations are usually referred to as business enterprise. The main activities of a business enterprise are focused on meeting its primary objective of making profit. Peripheral or related activities are also undertaken to meet the same main objective.

On the other hand, a non-profit organization, whether governmental or private, is established not for profit but to render services and meet the needs of the members of the community. These said needs may be directly or indirectly related to education, health and physical care, livelihood, cultural and social growth, and spiritual and moral development.

Business Solvency

Aside from making profit, another important objective of business enterprise is to make sure that they have immediate access to a sufficient amount of cash that is needed to settle their business obligations within a reasonable period of time. A business enterprise that has sufficient cash to pay its debts as they mature is said to be solvent. 

In contrast, a business enterprise that cannot meet its obligations as they fall due is said to be insolvent.

Financial Reporting

Financial reporting is the provision of financial information about an entity to external users that is useful to them in making economic decisions and for assessing the effectiveness of the entity's management.

The principal way of providing financial information to external users is through the annual financial statements.

However, financial reporting encompasses not only financial statements but also other means of communicating information that relates directly or indirectly to the financial accounting process.

Financial reports include not only financial statements but also other information such as financial highlights, summary of important financial figures, analysis of financial statements and significant ratios.

Financial reports also include non-financial information such as description of major products and a listing of corporate officers and directors.

Financial Statements

Financial Statements are the means by which the information accumulated and processed in financial accounting is periodically communicated to the users. Stated differently, the financial statements are the end-product or the main output of the financial accounting process.

Financial statements are a structured financial representation of the financial position and financial performance of a business entity. 

Users and Uses of Financial Statements

IAS 1 describes the financial statements as structured representation of the financial position and financial performance of an entity.


Financial statements are directed toward the common information needs of the users. These financial statements are considered general purpose reports and are intended to meet the needs of the users who are not in a position to demand reports tailored to meet their particular information needs.


The Framework enumerates the common users of the financial statements. They are the investors, employees, lenders, suppliers, and other trade creditors, customers, government and their agencies, and the public.

1. Investors. Investors are the providers of the risk capital and they, along with their advisers, are interested in information which enables them to assess the risk inherent to, and the return provided by, their investments. Financial information will help present investors to determine whether they should hold, sell, or increase their investments. Potential investors, on the other hand, will be able to determine whether or not they should buy an investment.
2. Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. The information provided by the financial statements helps them assess their employer's ability to provide just remuneration, viable retirement benefits and possible employment opportunities.
3. Lenders. Suppliers and other trade creditors. Financial statements provide lenders, suppliers and other trade creditors financial information necessary in determining whether their loans, related interest and all amounts owing to them will be paid when due. Potential lenders and creditors are guided by the information provided by the financial statements whether or not they would extend credit or loan to the enterprise.

Definitions of Accounting

Accounting is a very useful communication tool both in the business and business world. It is a special kind of language. It is a tool that enables us to communicate to various interested parties or data-users certain quantitative information about the financial activities of a business enterprise.


Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities, which is intended to be useful in making economic decisions.