FAQs
The users of financial statements include present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the public. They use financial statements in order to satisfy some of their different needs for information.
How are financial statements used externally? ›
They are used to assess an entity's overall financial health. Internal and external users (i.e., suppliers, creditors, state, and federal agencies) depend on these statements to analyze the entity's financial position and make informed decisions.
What are general purpose financial statements for external users? ›
GPFS are financial statements that are prepared for external users, such as shareholders, lenders, regulators, and investors. They are more comprehensive and detailed than SPFS and are intended to provide a full picture of a company's financial position, performance, and cash flows.
Who are the external users of financial statements? ›
External users of information include present and potential Investors (shareholders), Creditors (Banks and other Financial Institutions, Debenture holders and other Lenders), Tax Authorities, Regulatory Agencies (Department of Company Affairs, Registrar of Companies), Securities Exchange Board of India, Labour Unions, ...
Who are the 10 users of a financial statement? ›
The users of financial statements can include; Owners of a company, Company management, Investors/shareholders, Customers, Competitors, Government agencies, Employees, Investment analysts, Lenders, Suppliers/vendors, and General public.
Which external users are generally most interested in an entity's profitability? ›
Investors, Creditors, Owners, Customers, and Regulatory agencies are the external users. Managers of business operations are internal users. Both groups are interested in profitability, financial position, and cash flows of the entity.
What are the 4 external financial statements? ›
Examples of External Financial Statements
balance sheet (statement of financial position) statement of cash flows (cash flow statement) statement of stockholders' equity (statement of shareholders' equity, statement of equity) notes to the financial statements.
Which of the following is the external uses of financial statements? ›
The correct answer is B. Investor. Reason: The investor of the company is the external user of the financial statement because these are people outside the organization who uses the information for making investment decisions.
Why do external users prefer audited financial statements? ›
Enhanced credibility and trust: External audits bolster the authenticity and reliability of financial statements, offering stakeholders, including investors and clients, confidence in the company's transparency.
Which is not an example of external users of financial statements? ›
Answer and Explanation:
Examples of external users are the IRS, creditors, and customers. Management is an example of an internal user because they are involved in the daily operations of the company.
One of the key financial reporting objectives is to enable investors to make informed decisions about the business. It gives them a view of the overall financial health of the business. For example, they can assess: How capital and other resources are being used.
Why do external users use accounting information? ›
The information should be relevant in order to influence the economic decisions taken by users. Accounting information has an impact on decision making by helping stakeholders, creditors and other users to evaluate past and future events. Thus, it confirms or corrects pre-decided expectations.
Which type of external user would most commonly use audited financial statements? ›
Investors. Investors are the most common external users of financial statements. Both credit and equity investors make and assess their investment decisions by using relevant financial information in a company's financial statements, including the balance sheet and the income statement.
Are financial statements sent to external users? ›
If someone wants to know about your finances but isn't part of your business, they're external users of financial statements. They fall into many more categories than internal users of financial statements: Lenders. If you want money from the bank, they're going to want to see your financial data first.
Does financial accounting serve external users? ›
Financial accounting is all about giving a general overview of a company's financial position to those outside the company. Its focus is on the formulation and administration of financial statements for external stakeholders including investors, creditors, and regulatory bodies.
Who mainly uses financial statements? ›
The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the balance sheet, income statement, and statement of cash flows. Not all financial statements are created equally.
Who are the primary users of financial statements? ›
Primary users of the financial statements are considered existing and potential investors, creditors, and lenders. Primary users obtain financial statement information and allow them to understand the overall health of the company such as its net cash flow status etc.
Who are the users of financial accounting? ›
There are three primary users of accounting information: internal users, external users, and the government (which is a specific form of an external user). Each group uses accounting information differently and requires the information to be presented differently.
Who is not the user of financial statements? ›
Answer and Explanation:
Customers. Although customers are free to download financial statements of public companies if they wish to, they often do not have a need to consult financial statements in order to make decisions.
