Main Users of financial Reports and Their Conflicts

1068 Words Sep 14th, 2004 5 Pages
Identify the main users of financial reports, explaining to what use(s) they may put such reports. To what extent is there a conflict between different uses? How far are these conflicts resolved in a single set of annual accounts?

The financial reports are profit and loss account, balance sheet and cash flow statement.

There are many users /parties interested in the accounts of a company /organization. These include the following:

The owners / shareholders

The directors / managers

The employees

The creditors, i.e. suppliers of goods on credit

The tax authorities

Lenders, such as banks or other financial institutions

Government

The users want the accounts for a variety of purposes, for example:

The owners/shareholders are mainly
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The viability is also important to them as they want to keep their current job as they are also employed by the business.

Employees, if not shareholders of the business, are employed by the management to work for the business for various purposes. Their salary will be treated as an expense against gross profit so management may try to minimize this expense by employing an efficient worker who are reasonably paid and reducing the number of employees while at the same time add more responsibilities to the remaining employees. Therefore, as long as the business remains, they could keep their job and secure their pay as a financial security, which is of great important to common employees. They would be happy to see the business grows via looking through the financial statements so that they would know that the can continuously work for the business.

Creditors are concerned with the viability of business because they would like to know if they are likely to be paid by the business before too long. As long as the business has sufficient liquidity to pay them, they do not care and are not very interested in how much profit the business generated.

Tax authorities always keep a keen eye on the profitability of the business because they want to the profit of the business to be taxed. They want to detect any underreported profit by examining the
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