Financial Accounting and reporting - Essay Example

f financial accounting and reporting is the preparation of financial statements such as the income statement, cash flow statement, fixed assets movement schedule and the balance sheet (MAYNARD, 2013, 309). The financial statements are to be made available to all users of financial information who include creditors, regulators of business operations, investors as well as the government through its taxation unit. Other objectives of financial accounting and reporting include provision of information that can be used to establish the solvency position of a given business.

The financial statements provide information relating to a firm’s ability to meet its short-term and long-term liabilities as they fall due. The information assists in ascertaining the financial position of a business in terms of its assets and liabilities which assist the business to clearly establish where they stand in reference to what they own and what they owe others. Another objective to be attained by financial accounting is the fact that it offers systematic recording of business transactions in an organized manner thus enhancing accountability and order in the business (SUTTON, 2004, 26).

Providing relevant information to be used by several users of financial statements is one of the top objectives of financial accounting and reporting. It assists the stakeholders in making rational decisions. Some of the key users of financial statements are listed below. The investors require financial statements in order to evaluate the practicality of investing in a given business venture. Investors use the information specifically to determine and to predict the future of a company’s dividend growth through the use of income statements.

They are able to further establish the various forms of risks associated with a given investment through a keen look into fluctuations in after tax profits, share price and dividend growth. The government requires financial statements from all companies and