Purpose of preparing financial statements

1. Objective 5.1
Purpose of preparing Financial Statements

2. Purpose of
preparing
Financial
Statements
The preparation of financial
statements are the most important
step in the accounting cycle.
It is important because they
represent the purpose of financial
accounting
The financial statements consist of
the Income Statement(Statement of
Comprehensive Income), the
Balance Sheet (Statement of
Financial Position) and the
Statement of Cash Flow
The final reports are prepared at the
end of the firm’s business or
calendar year.

3. Purpose of preparing Financial Statements

4. Purpose of
Financial
Statements
The previous slide identifies the
users of financial statements.
The diagram identifies the
financial statements and some
outcomes that can be achieved
from the prudent decisions the
users make
Users of accounting information
have a wide variety of needs
which must be satisfied. Some of
the needs are shown in the
diagram on the next slide

5. Purpose of preparing Financial Statements

6. Users of information will inspect
the following financial statements
for information about
Profit or loss: the income
statement
Ability to meet commitments on
time: the balance sheet
The efficient use of resources:
the balance sheet

7. The next slide contains
has an assessment for
you to do. All the best

8. Purpose of preparing Financial
Statements
Required: Consider the following users and
match each user to their individual needs
1. Bank Obtain credit supplies
2. Investor Receive approved loans
3. Creditors Value of dividends

9. who are the
users of
financial
statements?
Look at the
following
video…