Objective and Users of Financial Statements| Tally Solutions

Tally Solutions |Updated on: December 29, 2021

Objective of Financial Statements
Users of Financial Statement

Objective of Financial Statements

Financial statements are reports prepared by a company’s management to present the financial performance and position at a point in time. The very basic objective of financial statements is to provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions.

The Financial Statement are prepared to meet the common needs of most users. However, financial statements do not provide all the information that users may need to make economic decisions because

They basically portray the financial effects of past events.
Do not necessarily provide non-financial information

The statement of financial accounts also shows the results of the stewardship of management or the accountability of management for the resources entrusted to it. Financial Statements helps the stakeholders, both internal as well as external take various decisions.

The financial effects of transactions and other events are grouped into broad categories according to their economic characteristics to give us a true picture of the company as mentioned in the below table.

Elements of Financial Statements	Measures
Assets and Liabilities Equity = Capital + Reserves	Financial Position
Incomes and Expenses	Statement of Profit and Loss

Users of Financial Statement

Financial statements users include present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the public. These users look forward to financial statements to satisfy some of their information needs. The below table explains the different types of users and the specific information they seek form financial statements.

Users of Financial Statement	What information they need
Investors	Investors being the providers of capital are concerned with the risk and return provided by their investments.
Employees	They are the internal users who look for this information for making decisions
Lenders	Lenders are interested in information which enables them to determine creditworthiness of the company
Trade creditors	Trade creditors are interested in information which enables them to determine whether amounts owing to them will be paid when due.
Customers	These outsiders have an interest in information about the continuance of an enterprise, especially when they have a long-term involvement with or dependent on the enterprise.
Government and other agencies	Governments and their agencies look at these financial statements to determine the compliance adherence of the company.