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
In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial
A financial statements are documents prepared communicating with a business financial activities. Financial statements are a key component of accounting. Financial statements are presented in a structured manner with conventions accepted by accounting and regulatory personnel. There are four different financial statements which includes the balance statement, income statement, retained statement, and the statement of cash flow.
“Access to good financial information is essential to success in the policy and financial management arenas” (Bartle, Hildreth, Marlowe. P. 222). Proper accounting is the cornerstone to working towards a balanced budget. The CAFR (comprehensive annual financial report)
There are four major financial statements that investors, creditors, accountants, CEO’s, and the like study when looking at the financial
Employee representatives’ concerns are the ability to maintain current standards of living, having benefits that will allow them to live comfortably at retirement age and maintain all jobs possible within a viable industry. In addition, their health, safety, and changes in workplace are of concern as they can affect their input and position.
The conflict to make sure your business continues to grow and provide positive revenue while providing a fair wage to your employees begins with the desire to become wealthy. Retaining the majority of the profits while providing minimal wages to your employees typically results in high employment turnover and unhappy employees. On the other hand, if you were to pay your employees more than your revenue allows remaining profitable the business will likely
Financial statements are commonly called balance sheets, income statement, statement of owner’s equity, or statement of cash flows.
They are concerned about the company’s profitability and stability, which affect the ability of the company to pay salaries and provide employee with benefits. They may also be interested in its financial position and performance in regards to their career development opportunities.
As companies continue to try to come up with a plan for remaining profitable, some are overlooking one of their best opportunities due to their short sightedness and obsession for short term gain. It is the very asset which most firms claim is their most important and the one which provides them their competitive advantage. It is also, in some companies, the asset which is most mistreated and neglected as it is the most costly. It is the company’s employees. I don’t know of any company which would not state that employees and their knowledge of the company, its products and services, processes,
Such profits are necessary to provide additional compensation to shareholders/owners while constituting capital for future growth, repayment of debt, etc. By the way, it’s a good idea to create a personal budget, so the management team will know how much they need each month from the business in terms of salary and draws, distributions or dividends.
As the business environment grows and companies find new ways to expand into their respective - or even new – markets, it is important that reporting standards stay up to date with changes and continue to assist companies in providing their users with useful accounting information. Information is labelled as being useful when it meets the
Financial reports consist of a statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, notes, directors' declaration, directors' report and the auditor's report. The financial statements need to be prepared in accordance with applicable accounting standards, making the necessary disclosures in order to be transparent and fully inform readers about the activities and financial situation of the entity.
They would want to earn high wages and keep their jobs. Employee is more of an internal stakeholder.
Employees are essential to a well-functioning business and to provide quality service to consumers. It is important for the business to care for their staff, making sure that they are happy with working conditions etc. and this is right up there with the importance of financial matters, because customer service is another key to returning customers, and if there is not a happy worker then there won´t be good customer service.
The financial statements are very useful to all this group of user. Explain each of them;