Describe the different users of financial statements and their needs

Accounting and legal services, and Other selling, general and administrative expenses.

Describe the different users of financial statements and their needs

Users of Financial Statements The objective of accounting is to provide information to users for decision-making.

But, who exactly are these "users of financial statements"? What information do they need? The users of accounting information include: Owners and investors Stockholders of corporations need financial information to help them make decisions on what to do with their investments shares of stocki.

In the same way, small business owners need financial information to determine if the business is profitable and whether to continue, improve or drop it. Management In small businesses, management may include the owners.

In huge organizations, however, management is usually made up of hired professionals who are entrusted with the responsibility of operating the business or a part of the business. They act as agents of the owners.

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The managers, whether owners or hired, regularly face economic decisions — How much supplies will we purchase? Do we have enough cash? How much did we make last year?

Did we meet our targets? All those, and many other questions and business decisions, require analysis of accounting information. Taxes are computed based on the results of operations and other tax bases. In general, the state would like to know how much the taxpayer makes to determine the tax due thereon.

They are after the ability of the company to pay salaries and provide employee benefits. They may also be interested in its financial position and performance to assess company expansion possibilities and career development opportunities.

Describe the different users of financial statements and their needs

This need is also heightened in cases where the customers depend upon the entity. For example, a distributor resellerthe customer in this case, is dependent upon the manufacturing company from which it purchases the items it resells.

General Public Anyone outside the company such as researchers, students, analysts and others are interested in the financial statements of a company for some valid reason.

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Internal and External Users The users may be classified into internal and external users. External users, on the other hand, are not involved in the operations of the company but hold some financial interest.

The external users may be classified further into users with direct financial interest — owners, investors, creditors; and users with indirect financial interest — government, employees, customers and the others.

Assume we are looking into two companies — Company A and Company B. In which company would you invest — Company A or B? Then you get the point.

Wiki-BizTravel Consults: Users of financial statements and Their Information Needs

Online resource for all things accounting.IDW Announcement: Change in German Auditing Standard Setting from Transposition of International Standards on Auditing (ISAs) to Adoption of ISAs () (PDF) IDW Concept Paper: Additional Issues in Relation to a Conceptual Framework for Financial Reporting () (PDF).

These are the external users of financial statements who generally use the financial statements to assess the financial strength of a particular company. This is required so that they would be able to make logical conclusions about a company and make recommendations to their clients.

Jan 20,  · There are so many people using the accounting information for so many diverse purposes, thus, the purpose of financial statements is to cater for the needs of the users that could lead them to.

Financial statements are written records of a business's financial situation.

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