13 Jun 2022


Financial Accounting Data & Types of Users DB 2

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A financial statement is also referred to as a financial report. A financial statement is a formal record which displays the financial position and activities of either a person, business, or institution among other entities. For easy understanding, the statement is usually presented in a certain form and structured manner. Examples of financial statements within a business enterprise may include cash flows, balance sheets, statements of income, and retained earnings statements. Auditing of financial statement is usually done by accountants, firms, and government agencies to ensure that there is accuracy. Financial statements are used all over the world not just by firms, business organizations, and institutions but also by individuals, government, the general public and many others. Classes of financial statement users include managers and employees; information intermediaries and investments analysts, that is, news media; directors and shareholders; and suppliers and creditors. 

Management: for management, accounting information is a very significant tool when it comes to controlling, decision making and planning processes (Siddiqui, 2015). Also, this is information is needed by the management to help in the evaluation of the organization’s performance. In addition, this information can be used by the managers to draw comparisons with the close competitors 

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The owners (investors): Accounting information makes it possible for the business's ability to be assessed by the owners. With accounting information, the owners can determine the course of action to be taken in the future (Siddiqui, 2015). 

The employees: due to the interests that employees have in the stability and profitability of the company they need the company’s accounting information. This enables them to know and thus have a peace of mind that the company can pay salaries in addition to other benefits that they may be entitled to. This also provides them with a glimpse of the company’s possibilities of expansion and opportunities in career development. 

Creditors and Suppliers: lenders usually demand the accounting information of a business organization so as to help them in determining terms of lending, for instance, a bank will request for the financial statement of a company to be able to identify collaterals, interest rates, and loan amounts among others. On the other hand, suppliers will request for the accounting information to enable them to determine the businesses long-term commitment of relations to supply chains and to establish terms of credit (Easton, et.al. 2015). 

Strategic Partners and Customers: Customers usually demand financial information so they can assess the company’s reliability and staying power and the ability of the company to avail goods and services like agreed. Strategic partners demand the information for estimating the profitability of the company to assess returns fairness on strategic alliances and mutual transactions (Easton, et.al. 2015). 

Source documents usually accompany financial transactions of a firm. Source documents generally provide a description of the transaction that took place. The details on it may include, transaction amount, transaction date and transaction purposes among others. Examples of source documents are an invoice, computer-generated receipt, deposit slip, cash register receipt, and purchase order among others (Peavler, 2017). 

Financial statements are no doubt a great thing for a company. This is because it is required by almost every person that the business is in contact with, from the owners all the way to the suppliers. A financial statement is the clear image of a business organization. It is, therefore, important for that business to maintain credibility in this particular document for the well-being of the company. 


Peavler, R. (2017, February 28). The Source Document in an Accounting Transaction. The balance. Retrieved from https://www.thebalance.com/the-source-document-in-an-accounting-transaction-393005 

Easton, D. P., Wild, J. J., Halsey, F. R., & McAnally, L. M. (2015). Financial Accounting for MBAs, 8 th edition . Cambridge Business Publishers. 

Siddiqui, F. (2015, January 20). The users of accounting information and their needs. Linked In . Retrieved from https://www.linkedin.com/pulse/users-accounting-information-needs-fareed 

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