The primary objective of financial accounting is

ADS The Investment-Credit Decision—A Cash Flow Perspective
While the decisions made by investors and by creditors are somewhat different, they are similar in at least one important way. Investors and creditors are willing to provide capital to a corporation (buy stocks or bonds) only if they expect to receive more cash in return at some time in the future. A corporation’s shareholders will receive cash from their investment through the ultimate sale of the ownership shares of stock. In addition, many corporations distribute cash to their shareholders in the form of periodic dividends. For example, if an investor provides a company with $10,000 cash by purchasing stock at the end of 2012, receives $400 in dividends from the company during 2013, and sells the ownership interest (shares) at the end of 2013 for $10,600, the investment would have generated a rate of  return of 10% for 2013, calculated as follows:

All else equal, investors and creditors would like to invest in stocks or bonds that provide the highest expected rate of return. However, there are many factors to consider before making an investment decision. For example, the uncertainty, or risk, of that expected return also is important. To illustrate, consider the following two investment options:
1. Invest $10,000 in a savings account insured by the U.S. government that will generate a 5% rate of return.
2. Invest $10,000 in a profit-oriented company

While the rate of return from option 1 is known with virtual certainty, the return from option 2 is uncertain. The amount and timing of the cash to be received in the future from option 2 are unknown. The company in option 2 will be able to provide investors with a return only if it can generate a profit. That is, it must be able to use the resources provided by investors and creditors to generate cash receipts from selling a product or service that exceed the cash disbursements necessary to provide that product or service. Therefore, potential investors require information about the company that will help them estimate the potential for future profits, as well as the return they can expect on their investment and the risk that is associated with it. If the potential return is high enough, investors will prefer to invest in the profit-oriented company, even if that return has more risk associated with it

In summary, the primary objective of financial accounting is to provide investors and creditors with information that will help them make investment and credit decisions. More specifically, the information should help investors and creditors evaluate the amounts, timing, and uncertainty of the enterprise’s future cash receipts and disbursements. The better this information is, the more efficient will be investor and creditor resource allocation decisions. But financial accounting doesn’t only benefit companies and their investors and creditors. By providing key elements of the information set used by capital market participants, financial accounting plays a vital role by providing information that helps direct society’s resources to the companies that utilize those resources most effectively. ADS