Essay on Accounting and Financial Statements

Essay on Accounting and Financial Statements

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In this essay I am going to explain and identify external users of accounting information and give detail on the main characteristics and how these characteristics and the conceptual framework develop the benefits of financial statements for external users.
Financial accounting includes information distributed to external users that are not part of the enterprise, e.g. stockholders, creditors, customers and suppliers, although the information is also of interest to the company's officers and managers. (Yahoo, 2007)
External users have an interest in the businesses final accounts. They are individuals or groups from outside the business. (Cox, Fordon, 2008) They are also interested in the capability of a business to pay dividends. They may estimate the future cash flows using the past cash flow. The main external users consist of shareholders, creditors/suppliers, government, customers and lenders. (Elliot B and Elliot J, 2011, p.16)
Shareholders are interested in dividends and profits. As they invest their own money in to the business they are really interested in how the business is running and how well it is doing. They are the owners of the business and they need to get information from those that manage the business on their behalf. They don’t have access to the same amount of detailed information as the managers do. The financial reports that are given to the shareholders are also used by other users such as lenders and trade creditors. These reports are regarded as general reports. (Elliot B and Elliot J, 2011, p.4)
Creditors are interested in profits and net current assets. Anyone to whom money is owed to by the business is a creditor. They will look at how reliable the business they are supplying to is and see whethe...

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[Accessed 2nd November 2011]
Tutor, 2011 Accounting information characteristics [Online]. Available from: [Accessed 2nd November 2011]
Tutor, 2011 Accounting concepts and conventions [Online]. Available from: [Accessed 5th November 2011]
Tutor, 2011 Key characteristics of accounting information [Online]. Avaialable from: [Accessed 6th November 2011]
Journal (Electronic)

Morina D. David W. (2010) Financial Reporting for Private Companies: The Canadian Experience [Online] Available from:

Journal (2002) Accountancy, p.142

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