![]() Internal users are usually business enterprise managers who are responsible for planning and control of operations on a day-by-day and long-term basis. For comparison purposes, two or more periods of income are generally reported on the income statement. Unlike the Balance Sheet, which is a snapshot of a company's financial position at a point in time, the income statement reflects activity that took place during an accounting period. This statement reflects a company's growth and how well it manages its costs to produce revenues compared to its competitors. ![]() The income statement summarizes the results of a company's operations for the accounting period. The balance sheet is a snapshot of a company's financial position at a single point in time and is used to evaluate a company's liquidity, financial flexibility, and operating capability. The Balance Sheet summarizes a company's economic resources, economic obligations, and equity and their relationships on a particular date. Examples of these reports and their uses are as follows: There are a number of standard financial reports that a company provides for external users of accounting information. Other external users include financial analysts, advisors, brokers, underwriters, stock exchanges, taxing and regulatory authorities, labor unions, and the general public. This includes notes payable as well as suppliers extending payment terms on goods and services sold to the company. Creditors use accounting information primarily to evaluate a company's credit worthiness, which drives the amount of money a creditor will lend, as well as the interest rate to charge, depending on the perceived risk of default. Investors use accounting information primarily to help them make decisions about buying, selling, or holding a security. ![]() These user groups have somewhat dissimilar information needs because of their different relationships to the business enterprise providing the economic information.Įxternal users include actual or potential investors, creditors such as suppliers and lending institutions, and other users. The decision makers, or users, of accounting information, can be divided into two major categories: external users and internal users. Non-profits are required to have audits demonstrating compliance with GAAP principles to retain their non-profit status with the IRS. As in publicly traded companies, privately held companies may be required to have annual independent audits or reviews. Privately held companies are generally required to file GAAP financial statements by creditors or other third party stakeholders. To ensure that the financial statements are in accordance with GAAP, each publicly traded company is required to have annual financial audits by an independent CPA firm.
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