Statement of Financial Position
(b) The purpose of a financial statement is to provide useful information in making major decisions in investment and lending decisions of which the major objectives includes finding out the financial position of the company, to asset the stewardship function and predictability of the company's performance and also to identify the strength and weakness of the company. Financial terms are usually referred to into two basic statements, the Income statement and the statement of Financial Position.
The Income statement also known as profit and loss ...view middle of the document...
(Cited http://beginnersinvest.about.com/od/incomestatementanalysis/a/income-statement-analysis.htm , 21 April 2012) as well as the performance , dividend payment pattern and whether the company has the ability to create wealth as well as whether are they contributing to the society if the company proves to be in weak management performance and equity, the investors can use their rights to complain and vote at the annual general meetings.
Managers, to a manager accounting provides managers with data needed to determine whether a business is at a loss or a profit. If managers notice that the trend is for sales to decrease, then they can take measures to stop this trend. By referring to the accounting information they can decide whether they need to change prices or decrease expenses to handle the down-trend. As their performance linked bonus and wealth creation are also affected by the accounting information they are also responsible for the results of their decision made, marketing position of the company can also be monitored by the manager so as not to lose out to competitors.
(Cited http://smallbusiness.chron.com/can-managers-use-accounting-information-3950.html, 21 April 2012)
Banks, uses accounting information to speculate upon opportunity of attractive business in placements and resource attraction.
(Cited http://steconomice.uoradea.ro/anale/volume/2007/v2-finances-accounting-and-banks/83.pdf , 21 April 2012) by looking up the financial statement banks can evaluate whether a company has enough credibility before allowing a loan and also using gearing ratio, the bank can know how much debt and equity the company has, they can also find out if the company are regularly honoring payments instead of avoid and not paying or whether the company has violate any clauses in the past which will affect their chance of getting a better credibility.
Inland Revenue Authority of Singapore also known as IRAS, will use accounting information to have an audit programme, audits are conducted through an examination of accounting books, records and financial affairs to verify that income tax returns submitted are in compliance with tax laws, as well as to identify whether the selected company being audited whether they have paid the right amount of tax, did the...