Finalisation of Books of Accounts (i.e. Financial statements) are the basic and formal annual reports through which the corporate management communicates financial information to its owners and various other external parties which include– investors, tax authorities, government, employees, etc.
The financial statements generally include two statements known as balance sheet and profit and loss account which are required for external reporting and also for internal needs of the management like planning, decision-making and control. These two basic statements are supported by number schedules, annexures, supplementing the data contained in the balance sheet and profit and loss account. Apart from these two basic financial statements, there is a need to know about movements of funds and changes in the financial position of the company. For this purpose, a statement of changes in financial position of the company or a cash flow statement help in this direction. Objectives of Financial Statements Financial statements are the basic sources of information to the shareholders and other external parties for understanding the profitability and financial position of any concern. They provide information about the results of the concern during a specified period of time and status of the concern in terms of assets and liabilities, which provide the basis for taking decisions. Thus, the primary objective of financial statements is to assist the users in their decision-making.