The information in the financial statements is of interest to a number of internal and external parties . They include :
Internal Users
1. Owners :
Owners contribute capital in the business and thus bear maximum risk . They are interested to know the profit earned or loss incurred by the business , besides safety of their capital . The Financial Statements give this information about the business
2. Management :
Management makes extensive use of accounting information to arrive at informed decisions such as determination of selling price , cost control and reduction , investment in nto new projects ,etc .
3. Employees and Workers :
Employees and Worked are entitled to bonus as t the year end , which is linked to the profit earned by an enterprise . Therefore , the employees and Workers are interested in financial statements . Besides , financial statements also show wheather the enterprise has deposited it's dues into the Provident Fund and Employees State Insurance etc , or not .
External Users
1. Banks and Financial Institutions :
Banks and financial institutions provide loans to the businesses . They watch performance of the business to know wheather it is progressing as projected to ensure safety and recovery of the loan advanced . They assess it by analysing the accounting information .
2. Creditors :
Creditors are the parties who supply goods or services on credit . Normally , a large amount of suppliers remain invested in credit purchases . Before granting credit, creditors satisfy themselves about the credit worthiness of the business . The Financial Statements helps them in making such an assessment.
3. Government and it's Authorities :
Government makes use of financial statements to compile national income accounts and other information .the information so available to it enables them to take policy decisions.
Government levies varied taxes such as Excise Duty , Vat , GST , Service Tax and Income Tax . These government authorities assess the correct tax dues from the financial statements .
4. Researchers :
The information in financial statements helps researchers in studies or surveys related with a particular firm or industry.
5. Product Pricing :
Accounting information is required for establishing correct pricing . Sometimes , prices of some products are fixed by the government so it needs accounting information to fix fair prices of the product .
6. Public :
They want to see the business running since it makes substantial contribution to the economy in many ways , e.g., employment of people , patronage to suppliers , etc . Thus , financial accounting provides useful financial information to various users groups for decisions - making .
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