Financial statements provide comprehensive information about the Essay - 1

Financial statements provide comprehensive information about the reporting entity that is useful to existing and potential stakeholders - Essay Example The role of the accountants and the auditors in ensuring a true and fair view of the financial statements has been explained. This is followed by the review of the key components in the financial statements which includes the income statement, balance sheet and the cash flow statement. The parameters of the income statement, balance sheet and the cash-flow statement and the information communicated by these key components have been explained. The interpretation of the key components of the financial statements fulfils the general purpose of the companies in communicating the effectiveness of the strategies for capital maintenance and wealth maximization. The financial statements are the means of communicating to the users about the business performance of the company. The companies of all business sectors all over the world have used the financial statements as the primary instrument of informing the stakeholders whether existing or potential, about the activities of the company in the area of its business throughout the year (Baker and  Powell, 2009, p.75). The users of the financial statements include the existing shareholders, the internal stakeholders that include the employees and the management, the external stakeholders which includes the customers, government, creditors and lenders, the potential investors, etc. All the users of the financial statements, whether internal or external, are only interested in maximization of profits of the company. The companies also carry out their business with the primary aim of maximization of wealth of the shareholders (Bhattacharyya, 2011, p.62). The various measures taken by the compan y during its operations in the business throughout the year are communicated to the stakeholders with the help of financial statements. Therefore, the financial statements of the companies are prepared and represented in a manner that they contain comprehensive information about the reporting entity that