Demonstrate your ability to explain the objective of financial reporting and to apply the definitions of financial statement elements to identify events and transactions that businesses recognize in their accounting information systems. Limit the length of your response to each subpart to a maximum of 50 words. Spell-check and grammar-and-style-check your completed response using MS Words tool for this purpose, being sure to correct any matters identified by these checking tools.

Situation

The FASB has described the objective of financial reporting and financial statements as providing information:

1. Useful for making investment and credit decisions;

2. Useful in assessing the future cash flows to a business and its investors and creditors; and

3. About a business economic resources, equity and liability claims to those resources, and changes in those resources

First, state which of the basic financial statements balance sheet, income statement, statement of cash flows, and statement of changes in stockholders equity appears to respond most directly to each of the above elements of the financial reporting objective. Then, explain how you might use each such statement to achieve the related objective element (you may you use illustrative examples for this purpose).