Analyzing Users and Importance of Financial Statements in Accounting

This report provides an overview of the users of financial statements, emphasizing their crucial role in strategic decision-making. It distinguishes between internal stakeholders, such as owners, management, and employees, and external stakeholders, including competitors, financial institutions, and government agencies. Each group leverages financial data to inform decisions related to policy formulation, identifying areas for improvement, resource allocation, investment, and lending. The report highlights that financial statements, adhering to the full disclosure principle, offer comprehensive insights into past, present, and future organizational activities. By understanding how different stakeholders utilize financial information, organizations can enhance their performance, adapt to market conditions, and maintain a competitive edge. Desklib offers similar solved assignments and past papers for students.

INTRODUCTION TO ACCOUNTING
INTRODUCTION
Accounting is concerned with the process in which financial
transactions are recorded for having the information that can
allow to make strategic decision. In the current era, complexity
related to business process has inclined which require the firm
to pay attention on developing significant accounting process in
turn sound decision can be made. The current study is based on
the topic such as who can use financial statements of a company
and how this data can help them.
Users of financial statements
• There are different kinds of stakeholders who
utilizes the financial data published via such
statements for accomplishing different purposes.
• This can be distinct between the internal and
external stakeholders who pay attention on using
information so that strategic decision can be made.
• The internal stakeholders include owner,
management and employees who are responsible
for managing the operational activities of business.
• There are various external stakeholders who use the
financial information published by the company via
different statements prepared for the specific
period.
• This comprises the stakeholders such as
competitors, financial institutions, banks, suppliers,
traders, customers, government agencies, etc.
• each type of stakeholder has interest in financial
information of the company so that strategic
decision for safeguarding their fund and reputation
can become possible.
Uses of financial statements
• There are different kinds of information which can be received by using the distinct
type of financial information providing statements (Durocher and Georgiou, 2021).
• The one of the significant aspect which can be achieved by applying utilizing the data
offered which includes strategic decision making regarding formulation of policy,
• identifying lacking areas, implementing suitable course of action, investing, lending,
etc. identifying that prevailing causes which are hindering organizational
performance so that relevant ability to make modifications can become possible in
order to overcome competition.
Importance of financial statement
• Financial statements are the formal records of the monetary
activities exerted by the company.
• There are different types of financial statements which are
prepared by the organization in order to give significance
details about the operational practices conducted of that
ascertaining ability to evaluate performance of firm can become
possible.
• According to the full disclosure principle of accounting which
articulates that organization should provide all the information
about past, current and future events via publishing financial
statements.
REFERENCES
Books and Journals
• Albizri, A., Appelbaum, D. and Rizzotto, N., 2019. Evaluation of financial statements
fraud detection research: a multi-disciplinary analysis. International Journal of
Disclosure and Governance. 16(4). pp.206-241.
• Durocher, S. and Georgiou, O., 2021. Framing accounting for goodwill: Intractable
controversies between users and standard setters. Critical Perspectives on Accounting.
p.102357.
• Palepu, K.G and et.al., 2020. Business analysis and valuation: Using financial
statements. Cengage AU.
CONCLUSION
From the above report it can be concluded that financial statements play crucial role in
influencing the decision making capacity of various people. The current investigation has
focused on gaining information about different users of financial statements which can be
divided into two parts such as internal and external. In addition to this, internal and external
parties have interest in company’s financial information in order to analyse its position so
that strategic decision can be made. There are several benefits of using such details that
comprises formulation of policy, eliminating lacking areas, higher effective utilization of
resources, etc.