Question

Financial Statements:

a. Financial accountants are responsible for preparing the company’s financial statements that will be used by owners, managers, external stakeholders, government taxing authorities, and potential investors. As a result, these three statements are considered an indicator of a business’s financial health. Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each.

b. Identify four different consumers (users) of a company’s accounting information. For each of the four users you identify, answer the following questions: • What do they use it for, and why do they find it helpful? • What problems would arise if they weren’t provided with accurate and timely accounting information?

Answer 1

The most important three key financial statements available to an organisation are:

1. Income statement: Income statement is the statement which shows the income and the expenses of the organisation and with the activities associated with. It shows the various particulars from where the income is arriving and the various particulars from where the expenses are being incurred.

2. Balance sheet: The balance sheet shows the position of the company. It shows the relevant information and the balance of the assets and the liabilities section of the organisation telling about what is the financial position of the company.

3. Cash flow statement: At last, the Cash flow statement is the statement prepared to show from where the cash and cash equivalents are being originated and being spent through and by the company. It shows the readily cash available with the company.

b) The four different customers for this accounting information would be the Shareholders, Financers, Employees and the Suppliers.

All these customers would find the above mentioned statements important and relevant because their money and interest are going with the organisations. Shareholders are investing money thus they would want to know the financial position of the company where it stands. Financers and Suppliers are providing goods, money and services to the organisation thus they want to know the financial position to check whether the company is having enough money to return or pay the money back or not. At last, employees would like to know the information to check where the company stands in the market as a good choice to be employeed in it or not. Thus, for all of them, these financial positions are relevant.

If these information wouldn't be available at the correct time, shareholders won't invest the money further in the company because they don't have an accurate knowledge about the working of your organisation. Financers won't provide you with effective loans as the cash flow wouldn't show the correct information about your working of the company. Suppliers and Employees also won't engage with you because the lack of the interested information and the financial position of your organisation.