Importance of Maintaining Accurate Financial Statements - Research Paper Example

The paper will explore why accurate financial statements are important for outside business interests Customers Customers are external parties that deal with the company by purchasing its products and services and are therefore interested in the financial statement of a company that needs to be accurate. Customers would be interested in the accurate financial statement for them to be able to know how the company spends its funds and manages its debts. Accurate statement of financial position and statement of comprehensive income will show the customers how the company is performing in terms of the profits the company makes relative to the debts it incurs, or the amount the company spends on its marketing strategies in comparison with operations (Horngren, Harrison & Oliver, 2012).

A customer would be interested in the financial statement for them to be able to gage whether the company is profitable and would continue as a going concern. If the financial statement reflects that the company may go under receivership, the customer may get a good picture and strategies on where they will get their products in case the business collapses a\s reflected in the financial statement. . Customers require that the companies they deal with handle themselves responsively toward the environment and giving back to the society through corporate social responsibility.

Therefore, accurate financial statement should contain corporate social responsibility that customers have become increasingly looking for in the company. This is because through financial statement customers would be able to know whether their preferred companies measure the overheads, returns, and their impacts on corporate responsibility initiative (Williams & Williams, 2006). Customer is always interested in knowing the plans of the management. This can be known only through an accurate financial statement that contains the section of executive manager’s discussions and analysis of what had happen in the past and the future prospects.

The management analysis is also considered as one way by which customers who does not understand other parts of the financial statement can gain some important information pertaining to company’s plans. Shareholders The shareholders of a company would also be interested in an accurate financial statement so that they can be able to determine whether their investments are being utilized effectively. This would be reflected in the Statement of financial position. Through financial statement, shareholders would be able to know whether the company is profitable and is likely to pay dividends in the near future or not (Horngren, Harrison & Oliver, 2012).

Creditors Creditors just like the customers use financial statements in a number of ways. They use the statement of financial position to know the company’s