Read this article to learn about the following thirteen users of financial statements, i.e., (1) Shareholders, (2) Debenture Holders, (3) Creditors, (4) Financial Institutions and Commercial Banks, (5) Prospective Investors, (6) Employees and Trade Unions, (7) Important Customers, (8) Tax Authorities, (9) Government Departments, and Others. Show
1. Shareholders: Divorce between ownership and management and broad-based ownership of capital due to dispersal of shareholdings have made shareholders take more interest in the financial statements with a view to ascertaining the profitability and financial strength of the company. 2. Debenture Holders: The debenture holders are interested in the short-term as well as the long-term solvency position of the company. They have to get their interest payments periodically and at the end the return of the principal amount. 3. Creditors: Potential suppliers of goods and materials and others doing business with the company are interested in the liquidity position of the company. 4. Financial Institutions and Commercial Banks: These financial institutions are interested in the solvency – short-term as well as long-term – and profitability position of the company. 5. Prospective Investors: Prospective Investors are interested in the future prospects and financial strength of the company. 6. Employees and Trade Unions: Employees and Trade Unions are interested in the profitability position of the company. 7. Important Customers: Important Customers who want to make long-standing contract with the company are interested in its financial strength. 8. Tax Authorities: Tax Authorities are interested in the profits earned by the company. 9. Government Departments: Government Departments dealing with the industry in which the company is engaged are interested in the financial information relating to the company. 10. Economists and Investments Analysts: Economists and Investments Analysts are interested in the financial and other information of the company. 11. Members of Parliament: Members of Parliament the Public Accounts Committee and Estimates Committee – are interested in the financial information of the government companies 12. SEBI and Stock Exchanges: SEBI and Stock Exchanges are interested in the prospects and performance of listed companies with a view to protecting the interests of investors. 13. Managers: Managers are interested in knowing through the financial statements the present position and future prospects of the company. This is mainly to review the company’s progress and position and take decisions for the future. If you want to know how a business is performing, financial statements provide the answer. Is there enough cash in the bank to pay the bills? Is the company making money? Have the assets been swallowed up by debt? The users of financial statements such as the balance sheet include people both inside and outside your company. Meet the StatementsBecause so many people rely on financial statements for information, federal regulation, and generally accepted accounting principles (GAAP) have standardized the formats. One big difference between internal and external users' statements is that financial statements for external use must fit these standard formats. If internal users such as your company's management or owners want information, you can use any format that works for them, or you. The essential financial statements are:
Internal Users of Financial StatementsInternal users of financial statements fall into three main groups: management, owners and, sometimes, employees. In many small businesses, the owners are the managers. The key users of financial information in a partnership, for instance, are usually the partners themselves.
Because those in management have to make decisions for the business, they need different information than other internal users of financial statements. For example, they may want income statements for each product line or store rather than for the business as a whole. External User StatementsIf someone wants to know about your finances but isn't part of your business, they're external users of financial statements. They fall into many more categories than internal users of financial statements:
External users' statements have to follow GAAP or similar accounting frameworks. That doesn't mean they all want the same information. Investors may be most interested in your financial performance, while lenders might focus on your current debt load.Who are the users of financial accounting information and their needs?Users of Accounting Information and their Needs:
The public, the government and its agencies, management, employees, lenders, suppliers, and other creditors in the business world are among the users of accounting information.
Who are the users of financial statements and what are their needs for financial statement?Understanding Financial Statements
The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows.
Who are the possible users of financial statements?The most common users of the financial statements are listed below:. Management of the Company.. Investors.. Customers.. Competitors.. Government and Government Agencies.. Employees.. Investment Analysts.. Lenders.. Who are the users of public sector financial statements and their information needs?1: Users of financial reports include citizens, resource providers, and service recipients or their representatives (including members of Parliament, statisticians, analysts, the media, financial advisors, public interest and lobby groups, regulators, trustees, and rating agencies).
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