Final answer:
The benefits of accounting information must exceed the costs as this ensures profitability and economic success, guiding businesses and national economy towards growth. It takes into account explicit and implicit costs and benefits, crucial for making informed financial decisions.
Step-by-step explanation:
The question asks us to explain why the benefits of accounting information must outweigh the costs involved in generating it. Privately owned firms are highly motivated to earn profits, which is essentially the difference between revenues and costs. When we look at accounting information, accounting profit involves only explicit costs—those that involve direct monetary payment. However, economic profit includes both explicit and implicit costs, which comprise opportunity costs and other non-cash expenditures. Economic profit provides a broader picture of a company's financial situation.
Decisions in business often involve a cost/benefit analysis, where one assesses the additional cost of adding one more unit of something against the additional benefit obtained from adding that same unit. This process aids in making informed decisions, ensuring that the marginal benefits exceed the marginal costs involved. Businesses and consumers alike benefit from this approach: businesses can increase their profits with better or cheaper products, consumers gain access to these products, and employees could potentially earn more income. When the overall benefits exceed the costs, the national economy tends to see positive growth.
Understanding the nuances between different profit calculations and performing a careful cost/benefit analysis are critical for making informed decisions that will lead to financial success and stability for both individuals and businesses.