Assignment on Accounting Application

Running head: ACCOUNTING APPLICATION
Accounting Application
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ACCOUNTING APPLICATION1
Introduction:
Financial statements are considered as the formal records containing fiscal activities
and defining the situation of business, individual or another entity. Appropriate fiscal
information is needed to be presented in an organised way and in such form which is easy for
understanding (Maynard, 2017). The main purpose of financial reports is to offer info
regarding the “financial position”, “performance” and variations in the position of the
company that are considered useful for wide variety of users in undertaking financial
decisions. The purpose of this essay is to discuss regarding the essence of financial reports in
decision making and its importance to every users.
Discussion:
The users of fiscal reports generally includes the proprietors, stakeholders, creditors,
suppliers, personnel, consumers, government, suppliers and common public. The different
users have different type of financial requirements. The owners and investors requires the
fiscal info to assess the capability of the company for success and profitability. While the
lenders require financial information in understanding the capability of the enterprise to pay
the liabilities on maturity (Carlon et al., 2019). The suppliers require financial information in
determining the capability of the business to pay the debt when it becomes due. They are
normally interested in evaluating the ability of a business to pay its short-term commitments.
The government generally require the financial information for the purpose of taxation and
regulatory purpose. Finally, the general public require the financial information to decide
whether they can suggest the enterprise’s security to their clients.
As a general rule, the financial reports usually comprises of the wide-ranging
depiction of the company or the industry in which it is operating. It also consist of the audited
reports of income, “financial position”, “cash flow” and notes to financial reports offering

ACCOUNTING APPLICATION2
details for numerous line of items (Weetman, 2019). Financial information are considered
neutral, they offer an accurate picture regarding the activities of business over the well-
defined period. The business manager later assesses the data to undertake operating decisions
as whether the business is in position of freeing up the present cash for operational
expenditure or requires an added credit. The information contained in balance sheet drives
numerous decisions such as whether the company should emphasize on changing its credit
policy or should emphasize on streamlining the collections in order to resolve majority of the
receivables inside thirty-days.
While fundamental analysis is reliant heavily on the “balance sheet” of the company,
“cash flow statement and income statement”. Investors use the information contained within
the “financial statements” to take decisions concerning the valuation and creditworthiness of
the organization (Wahlen et al., 2014). Without the information of financial accounting,
investors would have lesser understanding regarding the history and present financial health
of stock and bond issuers.
The financial reports are linked with each other. The financial accounting is
considered important for lenders since financial statements provides an outline of all the
assets, the short-term and long-term loans. This helps the users and lenders to obtain a better
sense of an organization’s creditworthiness (Harrison et al., 2014). In the long run, the users
of financial information wants to know the amount of risks that is involved by money to the
company that can be ascertained by reviewing the financial statements of the company. Once
it is determined, the lender will be better able to understand the amount of money it wants to
lend exactly and at what rate of interest.
The perspective investors uses the financial statements to conduct financial analysis
which acts as the basis of making their decisions either to make investment or not to make