what is the objective of financial statements
What is the objective of financial statements?
Answer: The objective of financial statements is to provide information about the financial position, performance, and changes in financial position of a company that is useful for economic decision-making. These statements are prepared to meet the information needs of various users like investors, creditors, management, and other stakeholders. The main objectives of financial statements can be summarized as follows:
1. Provide Information: Financial statements aim to provide relevant, reliable, comparable, and understandable information about the financial performance and position of a company.
2. Decision-Making: The primary objective is to assist investors, creditors, and other users in making economic decisions based on the information presented in the financial statements.
3. Assess Financial Position: Financial statements help users to assess the financial health of a company by looking at its assets, liabilities, equity, income, and expenses.
4. Accountability: The statements help in keeping a company accountable to its shareholders, creditors, and other stakeholders by providing a clear picture of its financial activities.
5. Evaluate Performance: Financial statements allow users to evaluate the performance of a company over a specific period by analyzing its profitability, efficiency, and liquidity.
Overall, the main objective of financial statements is to communicate the financial information of a business entity to its users in a clear and concise manner to facilitate decision-making and accountability.